The Hindu : Jaswant announces tax sops, new savings scheme

Online edition of India's National Newspaper
Thursday, Aug 01, 2002

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Jaswant announces tax sops, new savings scheme

By Our Special Correspondent

NEW DELHI JULY 31. Working on his promise of giving "more money to the investor and more food to the poor,'' the Union Finance Minister, Jaswant Singh, today announced some tax concessions and a new tax-free savings avenue while simultaneously announcing an `ann antyodaya scheme' (food for the poorest of the poor in the rural areas).

Replying to the debate on the supplementary demands for grants in the Lok Sabha, Mr. Singh raised the current limit under Section 80L of the Income Tax Act (relating to interest and dividend income) from Rs. 12,000 to Rs. 15,000, announced a new RBI tax-free bond attracting seven per cent interest with a six-year maturity period, and raised the threshold for tax deduction at source (TDS) on dividend income from Rs. 1,000 to Rs. 2,500 from each company.

He also announced that the scheme to launch the Indian Depository Receipts (IDRs) — which will enable Indian investors to invest in good companies abroad and in non-resident Indian ventures abroad — would be operationalised soon.

On investor protection, Mr. Singh announced the creation of a Serious Frauds Office in the Department of Company Affairs, a coordinated investigating agency to look into the "frauds that occur or are likely to occur.'' So far, such investigations, including into those companies, which had vanished with the depositors' money, were being conducted by various agencies, leading to delays and ineffective investigation. Besides, the Companies Act would be amended to take strict action against defaulting companies. The Government would also lay down new norms for statutory accounting and disclosure procedures to ensure transparency in operations.

The Minister also announced the setting up of a task force, which would redraw the Income Tax Act and make its recommendations within three months. He, however, hinted that most of the tax exemptions would be done away with.

"Tax laws are too complicated at present. The Act should be direct, simple, comprehensive and free from exemptions. This task force will work for the simplification of the Act and I wish to accept its recommendations at the earliest and not later than the next budget,'' he said. October had been set as the deadline for computerisation of the Revenue Department after which a data bank of all taxpayers would be created. This would improve tax compliance significantly.

On Section 80L, Mr. Singh said the current limit for annual tax exemption was Rs. 9,000 on specified income (interest income) and Rs. 3,000 on income from Government securities (infrastructure bonds, etc.). The limit was now Rs. 12,000 and Rs. 3,000. About the new RBI bond, he said that while the earlier limit of Rs. 2 lakhs per investor (except for retired and retiring employees) on RBI relief bonds would continue, a new tax-free bond would be launched soon which would attract interest of seven per cent and have a six-year maturity period.

About the Unit Trust of India, Mr. Singh said that the Government would take all steps to protect investor interests and that the Government would fully stand behind UTI on the US-64 scheme.

It would also help UTI meet its monthly income plan obligations by standing guarantee for a Rs. 1,000-crore loan that the latter would raise.

Referring to the spectre of drought, Mr. Singh said "the Government will not play politics in combating calamity or fighting drought.''

Though he expressed inability to spell out the allocations for individual States at this juncture, Mr. Singh said the task force on drought set up under the Deputy Prime Minister, L. K. Advani, would make "judicious readjustments and relocation of resources.''

As an immediate measure, he announced a new "ann antyodaya scheme'' which will have a special allocation to reach food to the poorest of the poor in rural areas.

He also promised to work towards a total rural credit limit of Rs. 75,000 crores this year, against an allocation of Rs. 32,000 crores in 1997-98, the last time monsoon was deficient.

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