Five Year Tax Holiday For New Industrial Undertakings In Industrially Backward Areas & Districts

[ Deductions Allowed to NRIs in the Computation of Total Income and Tax Payable]

The Finance Act 1993 with effect from the Assessment Year 1994-95, had provided that any new industrial undertaking located in an industrially backward State or Union Territory as specified in the 8th schedule or set up in any part of India for the generation and distribution of power will be completely exempt from income tax to the extent of 100% of the profits and gains derived from such industrial undertaking for the initial five assessment years. Of course such new industrial undertaking or power plant should begin manufacturing or producing articles on or after 1.4.1993 and before 1.4.2000, later on increased to 3 1.3.2002. Thus, a power plant can be set up in any part of India so as to become eligible for a 5-year tax holiday. But a new industrial undertaking to be eligible for a complete tax holiday for the first five years must be located in an industrially backward area as specified in the 8th schedule which broadly relate to Arunachal, Assam, Goa, Manipur, Meghalaya. Mizoram, Nagaland, Sikkim, Tripura, Union Territory of Andaman & Nicobar Islands, J&K, Pondicherry, Lakshadeep, D. & N. Haveli, etc.

 

A good deal of tax saving can be achieved through proper tax planning by starting a new industrial undertaking in the industrially backward areas or a new power plant in any part of India.

 

From the Assessment Year 1995-96 similar tax holiday would be available on a new industrial undertaking in any notified very Backward District manufacturing, etc. between 1.10.1994 to 3 1.3.2002. Vide Notification No. S.O. 440(E) dated 15.6.1999, 52 Category “A” and 70 Category “B” Districts have been notified [see (1999) 238 ITR 14 St.]. Likewise, the Income Tax (Amendment) Act, 1998 also made more changes.

 

The Finance Act 2002 had further extended the period from 31.3.2002 to 31.3.2004 by which if any new industrial undertaking is set up in a backward State or backward District, then it will be eligible to the tax holiday as it allowed to other industries set up earlier, namely 100% tax holiday for five years and 25% or 30% for the balance five years.

 
 
Deductions Allowed to NRIs in the Computation of Total Income and Tax Payable
1.Tax Benefit Regarding Life Insurance Premium, PPF Contributions, Nscs, Tuition Fees, etc.
2. Deduction For Donations To Certain Funds And Charitable Institutions
3. Deduction In Respect Of Profits And Gains From A New Industrial Undertaking Or Infrastructural Facility
4. Five-Year Tax Holiday To Hospitals At Certain Locations Sec. 80-1B (IIC)
5. Tax Holiday To Enterprises Providing Telecommunication Services, Industrial Parks, New Hotels And Having Commercial Production Of Mineral Oil
6. Five Year Tax Holiday For New Industrial Undertakings In Industrially Backward Areas & Districts
7. Liberalisation Of Tax Holiday Provision For Infrastructure, Telecom Services, Power Generation, Special Economic Zones, Industrial Parks, etc. [ Section 80-IA]
8. Ten Year Tax Holiday In Respect Of Certain Undertakings In Himachal Pradesh, Sikkim, Uttaranchal And N.E. States Section 80-IC
9. Five-Year Tax Holiday For Hotels In Districts Having A World Heritage Site Sec. 801D
10. Tax Holiday For Hotel And Convention Centres In NCT Of Delhi And Other Areas Section 801D
11. Deduction’ In Respect Of Medical Insurance Premia Section 80D
12. Additional Deduction For Health Insurance Premium Paid For Parents Section 80D
13. Deduction Of Repayment Of Loan For Higher Studies Section 80E
14. Deduction In Respect Of Certain Undertakings In North Eastern States
15. Other Deductions Like Depreciation, Etc. To Nonresident Indians
 
 
 
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