Modify Norms

According to Sections 54 EA and 54EB of the Income-Tax Act, 1961, a person can save tax on long-term gains if he were to make investment in certain mutual funds as also shares of infrastructure companies. This is a good provision and will benefit investors. However, one of the conditions mentioned is that if the company raising the money through share capital etc. for infrastructure projects fails to deploy the funds as prescribed under the IT Act within the prescribed time limit, then the approval so granted may be withdrawn by the Central Board of Direct Taxes.

The governments intention in imposing this restriction is to ensure that infrastructure companies issuing bonds, shares or debentures utilise the money for infrastructure facility. But the problem is that if at a later stage the approval granted by the CBDT to a particular company is withdrawn due to a lapse by the company, the poor investor will lose the benefit of tax exemption under Section 54 EA or Section 54EB.

The government should, therefore, modify the provisions in such a manner that the investor is not put to trouble due to violation by a company.