Measures Introduced to Allow Corporates to Access Lower Cost Funds

In the General Budget 2012-13 presented by the Union Finance Minister Shri Pranab Mukherjee in the LokSabha here today, a slew of measures have been introduced to allow corporates to access low cost funds and also to promote higher level of investments in several sectors.

To provide low cost funds to stressed infrastructure sectors, the rate of withholding tax on interest payments on external commercial borrowings (ECBs) has been proposed to be reduced from 20% to 5% for three years. These sectors are power, airlines, roads and bridges, ports and shipyards, affordable housing, fertilizer and dams.

To promote higher level of investments, the restriction on Venture Capital Funds (VCFs) to invest only in nine specified sectors has been proposed to be removed. It has further been proposed to remove the cascading effect of Dividend Distribution Tax (DDT) in a multi-tier corporate structure.

The Finance Minister, Shri Mukherjee also proposed to continue to allow repatriation of dividends from foreign subsidiaries of Indian companies to India at a lower tax rate of 15% as against the tax rate of 30% for one more year i.e. upto March 31, 2013.

Further, the Finance Minister has proposed to provide, investment linked deduction of capital expenditure incurred in the businesses of cold chain facility, warehouses for storage of food grains, hospitals, fertilizers and affordable housing at the enhanced rate of 150%, as against the current of 100%.

Also new sectors have been proposed to be added for the purposes of investment linked deduction which include bee keeping and production of honey and beeswax, container freight station and inland container depots and warehousing for storage of sugar.

Source : Equity Bulls

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