A new provision has been made to provide for 100% deduction from the profits and gains of an assessee engaged in the business of providing tele-communication services for the initial five assessment years. A deduction of 25% (30% in the case of companies) from such profits and gains will be allowed for a further period of five years. Thus, the total period of tax holiday will be 10 years. This deduction will be allowed to an undertaking which begins to provide the telecommunication services at any time during the period beginning on 1.4.1995 and ending on 31st March, 2005.
Another amendment relates to the extension of the tax holiday to industrial parks notified for this purpose, in accordance with any scheme framed by the Central Government. Vide Notification No. S.O. 193(E) dated 30.3.1999 an Industrial Park/Industrial Model Town Scheme has been notified. This tax holiday will encourage investments in industrial infrastructure. Those industrial parks which start operating during the period beginning on 1st April, 1997 and ending on 3 1.3.2009 will be eligible for 100% deduction for 10 assessment years.
Another amendment relates to the deduction equal to 50% of the profits of hotels which are located in a hilly or rural area or a place of pilgrimage or where tourism infrastructure needs to be developed. This will be allowed for a period of ten assessment years to hotels which start functioning at any time during the period from 1.4.1997 to 31.3.2001. In respect of hotels located at any other place, the deduction shall be 30% of the profits. However, the hotels located in the metropolitan cities of Calcutta, Chennai (Madras), Delhi and Mumbai (Bombay) will not be eligible for this tax deduction. This amendment will be effective from the A.Y. 1998-99 and subsequent years. Such hotels must be owned by a limited company only, having a paid up capital of not less than 5 lakh. Profits of agro-based industries, meat and meat products or poultry or marine or dairy products would also be exempt u/s 80IB (IIA).
From the A.Y. 1998-99 an undertaking having commercial production of mineral oil in the North-Eastern States of India would be eligible to 100% tax holiday for a period of initial seven assessment years, provided the refining does not begin on or after 1.4.2009.
The Finance Act, 1999 had extended the benefit of tax holiday for undertakings setting up new transmission lines on or after 1.4.1999 but before 1.4.2003 to profits derived tberefrom as are available from power generation undertakings. Industries in notified areas in NorthEast States would enjoy full tax holiday for ten assessment years, under new Section IOC inserted by the Finance Act, 1999 from the A.Y. 1999- 2000 and under Section 801C inserted by the Finance Act, 2003 from the AY. 2004-2005.