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Govt should encourage people to invest in weaker sectors by giving tax incentives'
November, 15th 2011

A developing country like India needs strong tax laws which should contain various incentives to the people who venture to invest in sectors such as housing, infrastructural development etc, according to Mr Mohanan Kuttickat, a leading chartered accountant.

He was addressing the students of the Sree Narayana Gurukulam College of Engineering at Kadayarippu near here as part of the Business Line Club lecture.

With the intention of an overall development of the economy and the country at large, the tax laws of a developing country should give privileges such as tax concessions or tax holidays for specific industries, he said.

A good tax planning will benefit the country for development in the required direction according to the policy of the Government and it will also give incentives to the entrepreneurs to start new ventures in those undeveloped area for making an overall improvement of the country. The Government should also encourage people to invest in weaker sectors of the economy by giving tax incentives.

He pointed out that Indian tax laws provides various incentives for industries set up in various backward areas, rural areas, special economic zones, 100 per cent export-oriented units. Industries could be started in areas having locational advantages and tax holidays.

Explaining the basics of tax planning, he reminded the students that no governments could function without the money collected from people and business establishments.

Majority of the people are reluctant to pay direct taxes while they generally welcome to pay indirect taxes, as it would not hurt them.

Tax planning, he said is a systematic reduction of tax liability of a person through the available framework of tax laws.

Tax planning is the legitimate avoidance or reduction of tax liability which is legally sustainable as against the tax evasion, which is illegal.

Under the tax planning measures, assesses will try to make use of the privileges or benefits offered under the tax law and reduce the tax liability, he said.

While entering into any business collaboration or joint venture agreements with foreign enterprises, the Double Taxation Avoidance Agreement, if any, entered into within the country in which the foreign enterprises is situated is to be studied and the benefits offered under such agreements are to be availed.

Under Double Taxation Avoidance Agreements entered into by various foreign countries with the Governments, non-resident individuals are liable to pay tax on various incomes such as interest earned in India at reduced rates compared to the applicable rate of tax under the Income-Tax Act, he said.

On the proposed Direct Taxes Code, he said some of the benefits presently available for long term capital gains are not offered in the DTC.

The present Income-Tax Act and Wealth Tax will get abolished with the introduction of DTC.

Earlier, Mr K.P. Narayanan, Assistant Regional General Manager, The Hindu, Kochi, introduced the guest to the audience.

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