Search the Internet          Tips  Sites: Finance, Investment

Tax holiday norms relaxed for pvt firms

Santosh Tiwary

The graded 10-year tax holiday under section 10A and 10B of the Income Tax Act will continue for the private limited companies operating from FTZs, SEZs, EPZs and EOUs if there is a change in their shareholding pattern due to an initial public offer.

However, such companies cannot avail of the tax holiday if there is a change in equity ownership without involving a public offer.

According to the revenue department officials, the benefit has been extended to the venture capital companies and venture capital funds through the amendments in the Finance Bill 2001.

They added that the amended Finance Bill 2001 has allowed the benefit of sections 10A and 10B to continue even if shareholding pattern have changed in case of VCCs/VCFs and companies that become public.

The Finance Act 2000 had imposed a condition that a company would lose the tax exemption if its ownership or beneficial interest was transferred to another person. It also said that any change in the shareholding pattern of such companies over 51 per cent would mean discontinuance of the tax exemption.

Union Finance minister Yashwant Sinha had relaxed this provision in the current budget by allowing public limited companies to avail of the tax exemption benefit even after a change in their shareholding pattern.

Officials said that the relaxation in the norms for these companies through the amendment to the Finance Bill 2001 would provide an easy exit route for the private investors and VCCs/VCFs.

"The VCCs and VCFs contribution to the Indian industry is around $1 billion and relaxation in norms will allow them to exit from the existing ventures and invest in new ventures," said an official.

Sources said that with the relaxation in the norms for availing benefits under section 10A and 10B, the exporting firms, especially software companies have been given a major boost.

Software industry had demanded from the government that the relaxation in norms for the public limited companies should be extended to all companies operating from the FTZs, EPZs, SEZs and EOUs.

The industry had also asked for the benefit to continue even after mergers and acquisitions.

However, revenue department officials said that the continuance of tax holiday even after a change in shareholding pattern due to mergers and acquisitions had not been allowed to curb misuse of the exemption.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report