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Telecom profits set for extended tax holiday

Our Bureau

NEW DELHI, Dec. 23

AN extension of the time period for which telecom service providers can be eligible for a complete tax holiday on their profits is on the cards. The Department of Telecommunications (DoT) was set to back the industry's demand to extend the deadline beyon d March 31, 2000, said officials.

Currently, profits of both basic and cellular operators are eligible for tax breaks under Section 80 IA of the Income Tax Act 1961. Radio paging, domestic satellite services and electronic data interchange (EDI) also figure in the list of services eligib le for concessions.

The breaks are, however, available only to an undertaking which starts providing these services between April 1, 1995 and March 31, 2000. A 100 per cent deduction is allowed for the first five assessment years commencing any time during the specified per iod (between April 1, 1995 and March 31, 2000), and 30 per cent for a further five assessment years.

Telecom service providers have sought an extension of the time period to be eligible for the tax break by five more years - i.e. up to 2005, saying that it would give a further fillip to the sector which is set to attract more players and higher levels o f investment.

In the basic services segment, the major players are the Bharti group, Reliance Telecom and the Tatas.

The Department of Telecommunications (DoT) was likely to take up the issue at its pre-Budget meeting with the Finance Ministry, said a senior official.

A decision by the Finance Ministry, which can come only through an amendment in the Act, would ultimately hinge on the revenue implications.

Although private players have been quick enough to take advantage, the Mahanagar Telephone Nigam Ltd (MTNL) has now claimed tax breaks under this section saying that it has invested Rs. 5000 crore in building up a network over the last few years.

The company has made a claim for this for the year, 1998-99 and reckons that it could translate into an annual tax savings of Rs. 500 crore.

Apart from telecom service providers, tax deduction in respect of profits is provided to any undertaking which develops, maintains or operates an industrial park or infrastructure facility.

The Government has extended the time period for availing the tax breaks for industrial undertakings set up in backward areas by two more years - i.e., up to March 31, 2002 in this year's Budget. This has been cited as a case in point by some of the telec om service providers.