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In order to increase the attractiveness of the Indian Equity Market, to provide relief to a large class of investors and to make India an attractive destination for investment, the Union Budget proposed to remove the Dividend Distribution Tax. While presenting the Union Budget 2020-21 in Parliament today, the Union Minister for Finance & Corporate Affairs, Smt Nirmala Sitharaman said, “The dividend shall be taxed only in the hands of the recipients at their applicable rates.”

Further, in order to remove the cascading effect, the Finance Minister has proposed to allow deduction for the dividend received by holding company from its subsidiary. The removal of DDT will lead to estimated annual revenue forgone of Rs. 25,000 crore.

Currently, companies are required to pay DDT on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess in addition to the tax payable by the company on its profits, the Minister said. It has been argued, she added, that the system of levying DDT results in increase in tax burden for investors and specially those who are liable to pay tax less than the rate of DDT, if the dividend income is included in their income. Further, non-availability of credit of DDT to most of the foreign investors in their home country results in reduction of rate of return on equity capital for them.

Concessional tax rate for Electricity generation companies

In order to attract investment in power sector, the Union Budget proposes to extend the concessional corporate tax rate of 15% to new domestic companies engaged in the generation of electricity.

To give boost to manufacturing sector, a concessional corporate tax rate of 15% was introduced in September 2019 to the newly incorporated domestic manufacturing sector which start manufacturing by 31st March, 2023.

Tax concession for foreign investments

In order to incentivize the investment by the Sovereign Wealth Fund of foreign Governments in the priority sectors, the Union Budget proposed to grant 100% tax exemption to the interest, dividend and capital gains income in respect of investment made in infrastructure  and other notified sectors  before 31st March, 2024 and with a minimum lock-in period of 3 years.

In order to make available foreign funds at a lower cost, it has been proposed to extend the period of concessional withholding rate of 5% under section 194LC for interest payment to non-residents in respect of moneys borrowed and bonds issued up to 30th June, 2023. The union Budget also proposed to extend the period up to 30th June, 2023 for lower rate of withholding of 5% under section 194LD for interest payment to Foreign Portfolio Investors (FPIs) and  Qualified Foreign Investors (QFIs) in respect of bonds issued by Indian companies and government securities.

The Union Budget further proposed to extend the concessional rate of withholding of 5% under section 194LD to the interest payment made on the Municipal Bonds. The Finance Minister also  proposed to further reduce the withholding rate from 5% to 4% on interest payment on the bonds listed on its exchange to incentivize listing of bonds at IFSC exchange.

Concessional tax rate for Cooperatives

As a major concession and in order to bring parity between the cooperative societies and corporates,  the Union Budget proposed to provide an option to cooperative societies to be taxed at 22% + 10% surcharge and 4% cess with no exemption/deductions. These cooperatives are currently taxed at a rate of 30% with surcharge and cess.

The Finance Minister also proposed to exempt these cooperative societies from Alternate Minimum Tax (AMT) just like Companies which under the new tax regime are exempted from the Minimum Alternate Tax (MAT).

Affordable housing

For realisation of the goal of ‘Housing for All’ and affordable housing, an additional deduction of up to one lakh fifty thousand rupees for interest paid on loans taken for purchase of an affordable house was announced in last year's budget. The deduction was allowed on housing loans sanctioned on or before 31st March, 2020.

In order to ensure that more persons avail this benefit and to further incentivise the affordable housing, the Finance Minister proposed to extend the date of loan sanction, for availing this additional deduction by one more year. 

Referring to the tax holiday provided on profits earned by developers of Affordable Housing projects approved by 31st March, 2020, Smt Sitharaman proposed to extend the date of approval of affordable housing projects for availing this tax holiday by one more year.  

Concession to real estate transactions

In order to minimize hardship in real estate transaction and provide relief to the sector, the Union Budget proposed to increase the circle rate limit of 5% to 10%.  Currently, while taxing income from Capital gains, business profits and other sources in respect of transactions in real estate, if the consideration value is less than circle rate by more than 5 percent, the difference is counted as income both in the hands of the purchaser and seller, while taxing income from capital gains, business profits and other sources in respect of transactions in real estate.

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Inaugurates AIIMS, Fertilizer Plant and ICMR Centre
Double engine Government doubles the speed of Developmental works: PM
“Government that thinks of deprived and exploited, works hard as well get results”
“Today's event is evidence of determination new India for whom nothing is impossible”
Lauds UP Government for the work done for the benefit of sugarcane farmers

Prime Minister Shri Narendra Modi dedicated to the nation various development projects in Gorakhpur, Uttar Pradesh.

The Prime Minister congratulated the people of UP for the inauguration of AIIMS and fertilizer plant and for the new building of Regional Medical Research Center of ICMR in Gorakhpur. He recalled laying the foundation stone for AIIMS and fertilizer plant, 5 years ago and inaugurating both today, underlining the working style of the government of finishing projects once undertaken.

The Prime Minister remarked that when there is a double engine Government, then the speed of implementing developmental works is also doubled. He said when work is done with a good intention, then even disasters cannot become a hindrance. When there is a government that cares about the poor, vulnerable & disadvantaged, it also works hard and shows results by bringing them along. He said today's event is proof that when the new India is determined, nothing is impossible.

The Prime Minister said, in a three pronged approach, the Government stopped the misuse of urea by introducing 100% neem coating of urea. He said soil health cards are given to crores of farmers so that they can decide what kind of fertilizer is needed for their farm. He said the Government laid emphasis on increasing the production of urea. Closed fertilizer plants were also forced to reopen to increase the production. The Prime Minister informed that with the completion of 5 fertilizer plants in different part of the country, 60 lakh tonnes of urea will be available in the country.

The Prime Minister appreciated the Government of Uttar Pradesh for the unprecedented work done for the sugarcane farmers in the recent years. He lauded the Government for increasing the remunerative price for sugarcane farmers, recently up to ₹300/- and for paying almost as much as the previous governments paid to sugarcane farmers in the past 10 years.

The Prime Minister said after independence till the beginning of this century, there was only one AIIMS in the country. Former Prime Minister Shri Atal Bihari Vajpayee had approved 6 more AIIMS. The Prime Minister said work is going on across the country to build 16 new AIIMS in the last 7 years. He announced the goal of his Government is that every district in the country must have at least one medical college.

The Prime Minister said everyone knew the importance of the fertilizer plant in Gorakhpur for the farmers of this region and also for providing employment. He said that in spite of the importance of the plant, the earlier governments did not show any interest in reopening it. Everyone knew that the demand for AIIMS in Gorakhpur was being raised for years. But those who were running the government before 2017 made all kinds of excuses for providing land for the construction of AIIMS in Gorakhpur. The Prime Minister noted drastic reduction in the cases of Japanese Encephalitis in the area and growth of the medical Infrastructure in the area. “With AIIMS and ICMR Centre, the fight against JE will gain new strength”, he said.

The Prime Minister criticized the politics of display of authority, power politics, scams and mafia that brought misery to the people of the state in the past. He appealed to people to be vigilant against such forces.

The Prime Minister said today our government has opened government godowns for the poor and the UP Chief Minister is busy delivering food to every household. He added that about 15 crore people of UP are getting its benefit. Recently, PM GaribKalyan Anna Yojanahas been extended beyond Holi. Earlier governments had defamed the name of UP by giving protection to criminals. Today the mafia is in jail and investors are investing freely in UP. That's the double development of the double engine. That's why UP has faith in a double engine government, he added.