Tax on dividends from foreign subsidiary lowered to 15%

In the General Budget 2011-12, the benefit of investment linked deduction has been extended to businesses engaged in the production of fertilizers.

Presenting the Budget, Union Finance Minister Pranab Mukherjee in the Lok Sabha on Monday said that the step is aimed at giving a boost to production in the agriculture sector. Such deduction will also be available to those who develop affordable housing under a notified scheme.

The rate of tax on dividends received by an Indian company from its foreign subsidiary has been lowered to 15 per cent for improving flow of such funds into India.

Additional deduction of Rs.20,000 for investment in long term infrastructure bonds has been extended for one more year.

The weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology, for scientific research has been enhanced to 200 per cent from the earlier 175 per cent.

The Finance Minister has also announced the creation of special vehicles in the form notified infrastructure that funds to attract foreign funds for financing of infrastructure.

Interest on the borrowings of these funds will be subject to a reduced to with holding tax rate of 5 per cent instead of the current 20 per cent. The income such funds will be exempt from tax.