PM hints at removing tax exemptions
New Delhi: Just before the Budget of 2007, Prime Minister Manmohan Singh has said take another look at tax exemptions, policy for rehabilitation of displaced farmers, focus on the power sector and further cuts in import tariffs.

He hinted at steps to control inflation and maintain fiscal discipline, while ensuring that the rate of investment is sustained for maintaining growth rates.

He said the country would now move toward a common general sales tax (GST) and better harmonisation of value added tax (VAT).

The government would finalise a new rehabilitation policy in three months to deal with issues arising out of land acquisition for industrial use, Singh said.

As India gradually integrates into the global financial system, the government would move into a less restrictive foreign exchange regime he said.
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Incentives given to SMEs
New Delhi: With the department of information technology (DIT) recommending measures, including fiscal incentives, to encourage growth and development of IT SMEs these may soon become investment hot spots.

To encourage SMEs to create their own products, the department of information technology has suggested tax depreciation and credits for investments made towards developing intellectual property (IP) by SMEs. The department has stated that IPs developed by SMEs in particular be encouraged in e-governance projects.

The department of information technology has also recommended that companies with a turnover of over Rs100 crore be offered tax benefits on costs incurred for goods and services procured from domestic SMEs through a subcontract model.

To further growth in the SME sector, it has been suggested that tax deductions of up to 20 pc of the taxable income be provided to all IT-ITeS professionals working with SME companies for a minimum period of two years.

With a view to popularise seed funding in SME start-ups, the department of information technology has recommended setting up of a fund that insures a certain percentage of the seed-funder's investment.

To facilitate industrial or market application of research, the department suggests that fiscal incentives in the form of a set-off against taxable income be given to individuals who invest in start-ups that provide a commercial output to work done by research.
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