All exemptions lapse by Apr 1
INTERIM BUDGET & THE GOVERNMENT/SUNSET CLAUSES
| So will sec 80HHC, which exempts the profit of exporters from income tax and section 10( 33) which exempts dividends from mutual funds being taxed in the hands of recipients. |
| This is because finance minister Jaswant Singh did not have the mandate in an interim budget to extend the life of these and other clauses by moving any amendment to the Income Tax Act, 1961. |
| As per the constitution, any change to the Act can only be made by moving a Finance Bill through Parliament. |
| The situation is different from that prevailing under indirect taxes where the executive has the power to modify the tax rates up to five per cent without having to route them through Parliament. |
| In the Budget for 2003-04, Singh had exempted long term capital gains made on purchase of scrips from tax liability. The move was expected to give a fillip to the capital markets. |
| The ministry had subsequently clarified that the benefit will be applicable for those shares which found a place in BSE-500 index. |
| In today's interim budget, the minister said that the regime of listed equities acquired on or after March, 1, 2003 being exempt from long term capital gains tax should be extended for a further period of three years, so as to provide stability. |
| According to Shyamal Mukherjee, Partner at PricewaterhouseCoopers, this means that while technically the exemption will not be operative from after March 1, 2004, the finance minister's statement was the best possible option at present. |
| He said this implies that in the interregnum the investors, will have to go by the minister's word that the provision will be operative till 2007. |
| Mukherjee said investors who have bought shares this year will have no problem, but only those who buy shares after March will have to face the uncertainty till the regular budget comes. The finance ministry has the power to make the provisions retrospectively. |
| However since the dividends from mutual funds have merited no mention from Singh, the situation on them remains unclear. Singh has also not opted to extend the benefit of section 80HHC in the Finance Bill he moved today. |
| Under a package cleared by former finance minister Yashwant Sinha in 2001-02, the profit of the exporters were progressively supposed to be brought under the income tax net. But now with the withdrawal of the provision, the export income is taxable. |