Budget 2000-01: Highlights
The budget has been a mixed bag for IT. We look at a few announcements that affect the industry.
Limitation of benefits for
STPI and EPZ units
Section 10A of the Income Tax Act has been amended to allow benefits to such
STPI units commencing on or after April 1, 1993 but before April 1, 2000. It
also restricts the availability of benefits to such units till March 31, 2009.
As per the amendment, all STPI
units commencing operations prior to April 1, 2000 would enjoy a tax holiday
till March 31, 2009. These benefits will however not be available:
to such STPI
units formed by the splitting up, or the reconstruction, of a business
already in existence.to onsite
services provided at client’s site abroad, which cannot be related to
development of software that is a product of the STPI unit.
Promotion of venture capital
(VC) culture
SEBI to be
single point nodal agency for registration and regulation of both domestic
and overseas VC funds.No approval
of venture capital funds by tax authorities required.One time
payment of tax by the VC fund at the rate of 20% when the fund distributes
its income to the investors. The same rate would apply to undistributed
incomes also.
Gradual | |
| Finacial Year | Deduction Allowed |
| 2000-01 | 80% |
| 2001-02 | 60% |
| 2002-03 | 40% |
| 2003-04 | 20% |
| 2004-05 | Nil |
| Exporters however would continue to enjoy exemptions from minimum alternate tax (MAT) till full phase out of the benefits under section BOHHE of the Income Tax Act. | |
Corporate tax
Rate of
corporate tax
Domestic companies–35%
Foreign companies–48%
Surcharge on domestic
companies–10%
Various
exemptions currently available while calculating MAT have been withdrawn and
MAT will be levied at the revised rate of 7.5% instead of the existing rate
of 10.5%. This will bring all zero tax companies within the tax net.
However, export profits under 80HHC and 80HHE remain exempt from the purview
of MAT. Exempt income of STPI, EOU, EHTP and EPZ units under section 10A and
10B will also continue to be exempt from the purview of MAT.
The
rate of tax on dividends distributed by domestic companies has been
increased from the present level of 10% to 20%. Dividend income in the hands
of share holders continue to remain tax free and as in the past, companies
paying dividends will have to
pay this tax at an enhanced rate of 20%.
Portfolio investment
Investment
limit for foreign institutional investors (FIIs) has been hiked to 40%
from 30%, subject to approval of Board of Directors and a special resolution of
the general body of the company.
Basic | ||
| Previous | Present | |
Computer systems | 20% | 15% |
Mother boards | 20% | 15% |
| Floppy diskettes | 20% | 15% |
| Microprocessos for computers | 5% | NIL |
| Memory storage devices | 5% | NIL |
| CD-ROMs | 5% | NIL |
| Integrated circuits and micro assemblies | 5% | NIL |
Excise
Excise on
software remain unaltered at NIL duty.Excise on
computer systems and peripherals remain unaltered at 16%.
Customs
Surcharge
equivalent to 10% of the basic duty introduced in 1999 remains unaltered and
would be imposed across the board except on certain items like computer
software.- Special additional duty
(SAD) of customs continues unaltered at 4%. This would now be applicable in
case of import made for trading. This would, however, remain exempt in cases
where the basic as well as additional duty is exempt.
