The Hindu Business Line : Jaswant's promise on MF schemes' dividend tax waiver

THE Finance Minister, Mr Jaswant Singh, today promised to extend the exemption on dividend distribution tax payable by equity-oriented mutual funds schemes for yet another year beyond March 31, 2004.

However, he added a caveat that would require amendments to the Income-Tax Act and for this, the present Government has to be voted back to power to give effect to the proposal on a retrospective basis.

Currently, mutual funds have to fork out a 12.5 per cent tax on the dividends distributed by them. However, in the case of open-ended, equity-oriented schemes (where the equity component exceeds 50 per cent), the 2003-04 Budget had provided an exemption till March 31, 2004. This exemption, like that given on long-term capital gains on listed equities acquired between March 1, 2003 and March 1, 2004, will not be available in the ensuing fiscal until the necessary amendments are made to the IT Act.

Winding up the discussions on the 2004-05 Interim Budget, which was passed by the Lok Sabha, Mr Singh assured that these amendments would be made, if the ruling coalition was voted back to power. He also used the occasion to announce a few more sops to various sectors. These included withdrawal of the 8 per cent excise duty on wood particles and fibre board, a Rs 8 per kg price subsidy scheme for tea growers for four months with immediate effect and limiting levy of service tax on tour operators to only 10 per cent of their charges.

He also proposed the setting up of a Rs 100 crore corpus venture capital fund under the Small Industries Development Bank of India (SIDBI), which would cater to small scale units in the pharma, biotech, software and other knowledge-based industries. The Fund would be operational from April 2004 and the corpus would be progressively raised to Rs 500 crore, Mr Singh added.

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