INDIA BUSINESS WORLD - MARCH 2006
THE MONTH THAT WAS

ONLY TERM DEPOSITS UNDER NEW CENTRAL SCHEME TO GET 80C SOP

The government has amended the Finance Bill 2006 to allow only those term deposits that are in accordance with a scheme framed and notified by the Centre to be eligible for tax deduction under Section 80C of the Income Tax Act, 1961. Several minor tax amendments, which included customs duty and additional countervailing duty exemption for coronary stents, were also moved before the bill was passed by Lok Sabha on Monday.

Finance minister P Chidambaram had proposed to allow tax deduction under Section 80C for investment in fiveyear or more term deposits of scheduled banks. However, existing schemes allow banks to offer term deposits for a maximum period of three years with an option to roll over the deposit on maturity.

Since the proposal made in the budget was open-ended, and therefore difficult to implement, the finance ministry has amended the Finance Bill 2006 to provide that investment in term deposits with a scheduled bank would be eligible for deduction under Section 80C if it was issued by the scheduled bank in accordance with a scheme framed and notified by the central government. The scheme would set out conditions such as five-year lock-in as well as tax treatment should the deposit be cashed early.

The government has also restored excise duty exemption on hand-made candles and bricks and scented supari sachet priced below 50 paise. Excise duty exemption was also extended to manually operated rubber roller machines and copra dryers. But excise exemption on umbrellas and cutting and polishing of marbles was not restored. The government also fully exempted coronary stents and stent systems used with cardiac catheter from customs duty and additional CVD of 4%.