It is unlikely that the recommendations for the proposed Exempt-Exempt-Tax (EET) regime will be applicable to investments in the coming financial year, if at all.In last year’s Budget, Finance Minister P. Chidambaram had set up a committee of experts that would work out the road map for moving towards an EET system. Under the EET system, investments and income from investments would be tax-free, but final accumulations would be taxable.The Committee to propose the EET roadmap had submitted its report to the government in late November, but the report hasn’t been made public yet and confusion still prevails among investors and sellers of savings instruments about when the EET regime would kick in.Sources told The Indian Express that the report recommends the applicability of the EET regime for savings instruments from a prospective date. ‘‘Existing investments will be grandfather-ed so that the new regime is not applicable to investments made in the past,’’ a source said.Moreover, if investment accumulations at the maturity of a savings instrument are not withdrawn for consumption but transferred to another savings instrument, they will not be taxed.In order to distinguish between old investments and the ones made after the EET regime kicks in, and to track investments that are rotated among savings instruments, the EET report envisages setting up an elaborate Tax Administration System. This system, known as the EET House, would be imperative for the regime to function efficiently.‘‘Even if the FM agrees to the EET committee recommendations, he wouldn’t be able to prescribe a cut-off date of April 1, 2006, as the EET House would have to be in place first. Since that may take a while to set up, it’s unlikely that the FM would make the move just yet. At best, he may set a deadline for the EET house to be set up,’’ the source said. Clearly, the new regime will take some more time to kick in.
