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CII seeks liberal tax shield on core projects

Our Bureau

NEW DELHI, Jan. 4

THE Confederation of Indian Industry (CII) has suggested that Section 80IA of the Income-Tax Act should be modified to allow for a 15-year tax holiday on certain infrastructure projects.

The chamber's pre-Budget memorandum states that though well-intended, the tax shield in its present form is wholly inadequate to jump-start investments in this critical area of infrastructure.

It has recommended that the present Section of 80IA be made a more liberal tax shield. It should have three components, including a 100 per cent tax holiday for 15 years on certain infrastructure projects related to power generation, transmission and dis tribution, roads, railways and telecom, including fibre optic cabling, creation of port facilities, transmission and distribution of natural gas and low cost housing.

Further, it has recommended a 100 per cent tax holiday for 10 years on civil aviation, tourism and middle-income housing and 30 per cent holiday for the next five years and a 100 per cent tax holiday for 20 years on social infrastructure, especially proj ects involving rural housing, rural and urban sanitation, supply of drinking water to rural and urban areas among others.

The chamber has also recommended that an amount of $2 billion out of the proceeds from India Millennium Deposit (IMD) should go towards financing infrastructure. It feels that this could be done by creating five-year bonds at 12.5 per cent with a call op tion in the third and fourth year.

Emphasising that it was time for the Government to resurrect the use of various type of tax-free bonds for financing infrastructure, the chamber said that such a step would not only help mop up greater household and corporate savings for infrastructure s ector, but also play a major role in creating a vibrant debt market.

CII added that the Government should allow ICICI, IDBI, IFCI, IL&FS, IDFC and HUDCO to create 8-9 per cent tax-free bonds with a minimum tenor of seven years for financing infrastructure projects.

It also recommended that the limit prescribed by Section 88 of the Income-Tax Act should be raised to Rs 1,20,000 provided Rs 60,000 of such a portfolio is held in the form of taxable infrastructure bonds.