Fresh lease of life likely for power tax holidays
Under the existing policy, the tax holiday benefit under Section 80-IA of the Income-Tax Act ends on March 31, making any power project that kicks off after that date ineligible. The incentive scheme allows a developer to get deduction of up to 100% profit for any 10 consecutive years out of the first 15 years of commissioning of a project.
The original deadline of the scheme was March 31, 2010, which was extended to March 31, 2011, through the Finance Act 2009. It has subsequently been extended in last two Budgets for periods of one year each.
“DTC is unlikely come into force before 2014. This will give us room to extend the profit-linked scheme by another year to provide relief to power projects that were supposed to be commissioned during the 11th Plan (by March 2012) but got delayed due to a variety of issues including fuel linkage,” said a government official who did not wish to be quoted.
The draft DTC Bill seeks to discontinue profit-based tax incentives and provides for an expenditure-based incentive (capital expenditure) scheme in relation to specific industries such as infrastructure (roads, ports and airports), power sector and SEZ developers. For the power sector, the government has been giving extension to the current regime to boost project development that would be crucial to bridge the widening energy deficit in the country. The peak deficit is still over 13% and the expectation is that this would increase if projects that are stuck are not cleared. Development
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