CII pitches for raising savings limit under Section 80C
January, 02nd 2007
In order to mobilise personal savings for the purpose of infrastructure creation in the country, the limit of savings under Section 80C should be raised from the current level of Rs 1 lakh to Rs 2 lakh, provided the additional Rs 1 lakh saving is invested in infrastructure bonds, according to the CII.
To maintain even an eight per cent growth trajectory, infrastructure needs upwards of $330 billion of investments over the next five years.
One of the ways to do it is to look how savings from personal savings can be mobilised, the chamber said in its pre-Budget memorandum to the Ministry of Finance.
Investments into infrastructure bonds would be tax-exempt in the year of committing the money.
However, income from the bond would be taxed at the prevailing rate at the time of encashing the bonds.
The chamber has also sought re-introduction of Section 10 (23G), which would help making investments in infrastructure more attractive.
The CII has urged the Government to do away with dividend distribution tax and if that is not possible, reduce it to five per cent.
It has also sought that Section 80M (omitted through Finance Act 2003) be reintroduced, as it provides for deduction with respect to inter-corporate dividends.
Justifying the need for this proposal, the chamber pointed out that countries such as Singapore, Belgium and Finland allowed for either exemption on the dividend paid by the subsidiaries or set-off of credit against tax payable under the respective tax law.