EDP(TAXATION BENEFITS) CA/IT/CM -6

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TAXATION BENEFITS

Taxation benefits avoid small scale industries are as follows:-

1. Tax Holiday—New small scale industries are exempted from the payment of income tax under section 80(J) of the act of their profit upto 6% (7.5% for companies) from the total income of the units in the assessment year in which the units began manufacturing provided the small scale units have followed the procedure laid down in section 80(J). the tax holiday is available upto 5 years from the commencement of production.
2. Depreciation allowance:- Under section 32 of the income tax act a small scale industry is eligible to get deduction on depreciation account of plant and machinery, land & building at the prescribed rate. In the case of small-scale industries the deduction from the actual cost of plant & machinery is allowed uoto Rs 20 lakhs. The depreciation is calculated on the reducing balance system.
3. Development rebate:-In respect of a new plant or machinery other them office appliances road transport vehicles of a small-scale unit which is wholly used for the purpose the production are sum by way of development. Rebate is allowed under section 33 in addition to normal depreciation. This rebate can be as follows
4. In case of plant and machinery 35% actual cost if it were installed before 1^st April 1970 & 25% of such cost if installed after 31^st March 1970.
5. where the plant & machinery was installed after 31^st March 1967 being an asset representing expenditure of a capital native on scientific research related to the business carried on by a unit. Development rebate is given as per the specified rates
6. Rehabilitation allowances:- This is granted to small scale units under section 33(b) whose business has been disturbed by
7. Riot on civil disturbance
8. Flood, cyclones, earthquakes or other natural calamities
9. Accidental fire or explosion
10. Action by an enemy

Small scale units reconstructed reestablished or revived is allowed a reduction of the sum by way of rehabilitation allowance equivalent to 60 % of the amount of the reduction allowable to the unit

1. Investment Allowance- The investment allowance was introduced in 1976 in place of depreciation allowance. It is allowed at a rate of 25 % of the cost of acquisition of new plant or machinery installed. The benefits of investment allowance are available for the articles or thing except certain low priority items specified in the 11^th schedule. However the small scale units are eligible for investment allowance irrespective of whether they are used for the purpose of business of construction of manufacture or production of Low priority items as given in the 11^th schedule. The small scale units can avail the benefit of investment allowance only when it has put to use the plant and machinery either in the year of installation or in the immediate following year, otherwise the benefit will be forfeited
2. Conditions to be fulfilled- An investment allowance reserve must be created during the relevant financial year. This reserve should be utilized for the purchase of plant and machinery for the business purpose of the small-scale industries in India. It cannot be used for any other purpose such as distribution of dividends or separation of profits or creation of assets outside India.

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