Tax Rebates Introduction & General Tax Incentives

In each section of Personal Tax (income tax), Indirect taxes (sales, excise & customs duty) and the corporate taxes there are certain rebates given to the tax payer if he fits in the prescribed criteria. These concessions or Tax Holidays as they call are meant to attract more and more people to pay tax. These rebates also mean less 'pinch' on the pockets and a good fast growth of economy.

Rebate is a deduction from tax payable. Since these are the best tax-slashing devices, it is absolutely essential to have a clear, concise and complete insight into these.

In computing the amount of income-tax on the total income of an assessee with which he is chargeable for any assessment year, there shall be allowed from the amount of income-tax, in accordance with and subject to the provisions of certain sections, the deductions specified in those sections.

The aggregate amount of the deductions under such sections shall not, in any case, exceed the amount of income tax on the total income of the assessee with which he is chargeable for any assessment year.

General Tax Incentives

The Government offers many incentives to investors in India with a view to stimulating industrial growth and development. The incentives offered are normally in line with the government's economic philosophy, and are revised regularly to accommodate new areas of emphasis. The following are some of the important incentives offered, which significantly reduce the effective tax rates for the beneficiary companies:

• Five year tax holiday for:
  • Power projects.
  • Firms engaged in exports.
  • New industries in notified states and for new industrial units established, in electronic hardware/software parks.
  • Export Oriented Units and units in Free Trade Zones.
  • As of 1994-95 budget firms engaged in providing infrastructure facilities, can also avail of this benefit.
• Tax deductions of of 100 per cent of export profits.
• Deduction of 30 per cent of net (total) income for 10 years for new industrial undertakings.
• Deduction of 50 per cent on foreign exchange earnings by construction companies, hotels and on royalty, commission etc. earned in foreign exchange.
• Deduction in respect of certain inter-corporate dividends to the extent of dividend declared.