'A lot of tall promises have been made by the finance minister in his speech on budget day'

The moot question is whether these projects will be implemented or will gather dust as in the past.

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Published: Mon 23 Mar 2015, 11:38 PM

Last updated: Thu 25 Jun 2015, 7:57 PM

A lot of tall promises have been made by the finance minister in his speech delivered on budget day in respect of various projects. The moot question is whether these projects will be implemented or will gather dust as in the past. Are any steps being taken in this regard?

S.R. Gandhi, Sharjah

The government has announced several projects in the infrastructure space. Five mega power projects, if implemented, will result in the power shortage being reduced. The prime minister will have a monthly conference call with state chief secretaries and secretaries of key ministries of the central government for monitoring and implementation of these projects.

A new governance programme called Pragati has been announced. This programme will be technology based with information on each project being available online. On the fourth Wednesday of every month, the prime minister will discuss any problems or hindrances in the implementation and give directions as may be necessary. These directions will remain in the system for future follow-up and review until the project is completed. Therefore, it is now reasonable to expect that whatever has been promised by the finance minister in his budget speech will be implemented in the near future.

 

I am connected with a charitable trust in India, which is running an educational institution. The trust has been incurring capital expenditure. The trust has been claiming exemption under section 11 of the Income-tax law which requires that 85 per cent of the annual income should be applied for charitable purposes. Would the capital expenditure incurred be treated as application of income?

R.K. Raghuraj, Dubai

This is an issue in respect of which there has been some litigation with the tax administration in India. However, courts have taken the view that if a charitable trust incurs capital expenditure as well as revenue expenditure, the conditions of section 11 would be satisfied if the aggregate of such expenditure is 85 per cent or more.

However, no depreciation can be claimed in respect of the capital assets acquired by the trust with effect from the assessment year 2015-16, relevant to the financial year ending on March 31, 2015. If the trust has to incur capital expenditure in future and proposes to accumulate its existing income without spending 85 per cent of it, it may do so by making an application to the assessing officer informing him about the specific purpose for which the income has to be accumulated. The maximum period for which the income can be so accumulated is five years.

I read a news report that foreign direct investment will now be permitted in the insurance sector to the extent of 49 per cent. Will this benefit policy holders?

P.K. Mukherjee, Abu Dhabi

It is to be expected that the increase in foreign direct investment limit from 26 per cent to 49 per cent in Indian insurance companies will result in infusion of more capital and domain knowledge in the insurance sector. This would translate into innovative products, infusion of cutting edge technology, and improved customer service standards.

The interest of policy holders will also be protected because, under the insurance law, the companies will be held responsible for mis-selling and higher penalties are now imposed. Under the new legislation, an insurance company can raise objections where correct information has not been provided by the policy holder; after three years this cannot be done. A policy holder can defend himself by proving that there was no suppression of material facts. A policy holder can nominate multiple nominees who would be the beneficiaries; he can also specify the percentage which would be bequeathed to each nominee.

 

H.P. Raina is a practising lawyer specialising in tax and exchange management laws of India.



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