Declaring that Indias financial recovery has begun before adding I would not say we are out of the woods,Finance Minister Pranab Mukherjee today announced a slew of concessions,including one per cent interest subsidy for lower and middle income housing loans,and exempted road repair and maintenance services from the ambit of service tax.
He also extended the sunset clause for tax holiday on development,operation and maintenance of industrial parks from March 31,2009 to March 31,2011.
Replying to the debate on the Finance Bill 2009,which was passed with some amendments in the Lok Sabha,Mukherjee announced that service tax on new services proposed in his Budget would come into effect from September 1.
Maintaining that lower and middle income housing deserves to be supported to stimulate this segment of house owners,Mukherjee said one per cent interest subsidy would be available to individuals for loans up to Rs 10 lakh for houses that do not cost more than Rs 20 lakh. He proposed to provide Rs 1,000 crore for this purpose.
I expect the developers to pass on the benefits of the tax holiday to home buyers by appropriately reducing the prices, Mukherjee said.
He also announced a tax holiday on profits derived from projects approved between April 2007 and March 31,2008.
Interest rates mostly range between 8-9 per cent currently for both housing finance companies and scheduled commercial banks. The scheme will be available for a period of one year alone. Housing finance companies registered with the National Housing Bank (NHB) will be able to pass on the benefit to the borrower.
About 70-75 per cent of housing loans stand in this range and it will benefit a large number, said R V Verma Executive Director,NHB.
Mukherjee also extended benefits to certain infrastructure sectors including roads and gas production which seem to have been left out of the Finance Bill.
Following post-Budget interactions with the industry,he has provided relief from service tax to agencies involved in repair and maintenance of roads. This has been a long standing demand of the industry as it is difficult to divide the portion of toll towards construction and maintenance. Even when a road is maintained some part of construction during repair does take place, said Pratik Jain,Executive Director,KPMG.
Mukherjee extended the tax holiday on gas production under NELP VIII to commercial production of natural gas in blocks licensed under Round IV of bidding for coal-bed methane. The benefit will be available prospectively from fiscal 2010-2011.
Other changes include temporary relief to industries joining the service tax net this fiscal. Goods transport services,law firms and cosmetic surgeons will now get an extra month to adjust their accounting systems. The decision,Mukherjee said,will come into effect from September 1,2009 instead of August 2009. Services for which the scope of service tax was expanded (including business auxiliary services,information technology software services and stock broking services) will also get the additional one-month period.
Having already announced the governments policy to improve cold chain infrastructure in the country,he declared a tax holiday on profits derived from packaging,processing and preservation of all perishable food processing items,especially those based on milk,poultry and meat products.
To give relief to severely disabled tax payers,the minister has raised the exemption limit from Rs 75,000 per annum to Rs one lakh. Deduction in respect of interest paid on education loan has also been made available to legal guardians of students under the proposed changes. Prior to this,the exemption was available on self-study or spouses or childrens studies.
The House rejected a string of amendments moved by CPM leader Basudeb Acharia and independent member Inder Singh Namdhari. One of the amendments moved by Acharia sought government-funding of elections. Leader of Opposition L K Advani suggested the House consider the issue in the backdrop of recommendations from parliamentary committees on this count. Mukherjee rejected the idea,saying it does not have any scope at present.