Tax Sops For Arcs In The Offing

Dividends may be exempted from distribution tax

The finance ministry is considering a string of tax sops for asset reconstruction companies (ARCs) and securitisation companies (SCs).

The ministry plans to allow the contribution made towards the initial capital of an ARC or SC by banks and financial institutions (FIs) as a deduction in the hands of the contributors while computing their business income and also exempt distribution tax on dividend distributed by the reconstruction trust. Further, income of the trust set up by the ARC is likely to be exempt from tax.

With the domestic financial system reeling under non-performing assets in excess of Rs 1,00,000 crore, the tax concessions being contemplated are significant.