Date:10/02/2006 URL: http://www.thehindubusinessline.com/2006/02/10/stories/2006021003040100.htm

Back NBFCs seek tax sops on par with financial institutions, banks for NPAs

Our Bureau

New Delhi , Feb. 9

NON-BANKING finance companies have sought tax sops similar to the ones extended to banks and financial institutions against provisioning done for non-performing assets (NPAs).

At a pre-Budget meeting with the Finance Minister, Mr P. Chidambaram, the representatives of the Finance Industry Development Council (FIDC), a self-regulatory organisation, suggested that income-tax benefits at a par with banks and FIs in the case of NPAs be granted to them as well since such entities also comply with all the prudential norms prescribed by the Reserve Bank of India.

Besides, the group has also sought income-tax benefits for infrastructure funding, as currently available to banks. Also, interest component in lease/hire purchase transactions should be exempted from the levy of service tax so as to bring it at par with the levy of service tax on loan transactions where interest component has been exempted.

Multiple taxes: It further requested the Government to do away with the multiplicity of taxes on lease/hire purchase transactions. Such taxes, the FIDC has said, have crippled the use of hire purchase and leases as important modes of funding by making them economically unviable.

The FIDC has said that NBFCs should be permitted to raise long-term funds by external commercial borrowings through the automatic route.

NBFCs have asked the Finance Ministry to set up a refinance institution for small and medium NBFCs.

"There is an urgent need to provide protection to the assets of NBFCs in order to protect the depositors and investors' interest. For this NBFCs need to be given access to Debt Recovery Tribunals," said an official statement.