Govt. slaps quake tax

By Our Special Correspondent

NEW DELHI, FEB. 1. In an effort to mop up funds for quake-hit Gujarat, the Union Cabinet today decided to levy a two per cent additional surcharge on income tax and corporate tax for the current financial year. The `quake tax', which had been under consideration for some days, is expected to generate an additional Rs. 1,300 crores to be entirely dedicated for relief and rehabilitation in the State.

This additional surcharge would be on top of all existing surcharges. For instance, persons with annual incomes above Rs. 50,000 and up to Rs. 1,50,000 are already paying a 10 per cent surcharge. Now, through an Ordinance which the Government proposes to promulgate, those with incomes above Rs. 60,000 would pay an additional two per cent surcharge. Those with annual incomes above Rs. 1,50,000 currently pay a surcharge of 15 per cent and will now be paying an additional two per cent.

Since the surcharge is calculated at the marginal rate of taxation, the 10 per cent surcharge translates into a 22 per cent tax at the 20 per cent level. At the 30 per cent slab, the surcharge works out to 34.5 per cent. Now another 0.4 and 0.6 per cent tax would be added at appropriate levels.

On corporates too

The surcharge has also been imposed on corporates who pay a 10 per cent surcharge plus an additional one per cent surcharge which was imposed in December last year to create the corpus for the Calamity Relief Fund. Now, the corporates would have to pay an additional two per cent surcharge over the existing surcharges.

The Cabinet, at its meeting, also decided to provide 100 per cent tax deduction for donations made to charitable institutions for providing relief and rehabilitation to the Gujarat victims. So far, donations only to the Prime Minister's Relief Fund or the Chief Minister's Relief Fund were granted 100 per cent tax deduction and all other charitable institutions registered under Section 80G of the Income Tax Act were eligible for 50 per cent deduction.

Certain conditions have also been imposed. For one, the benefit would be available to those charitable institutions which are already registered under Section 80G which means new institutions set up now would not be eligible for 100 per cent deduction. Secondly, the eligible institutions would have to maintain separate accounts for the Gujarat operations and would have to submit these account to the Central Board of Direct Taxes by June 30, 2002. The tax exemption would be eligible on donations collected till September 30, 2001 and the institutions would have to spend the money in Gujarat by March 31, 2002.

The Cabinet also decided to extend Section 35AC reliefs available under the IT Act to persons intending to take up relief and rehabilitation work in Gujarat. On customs and excise, the Cabinet decided that all material including construction material imported for relief and reconstruction in Gujarat would be exempted from import duties and all indigenous material such as cement, steel blankets and tents for relief and rehabilitation in Gujarat would be exempt from excise duty.

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