Ministry Gives Nod To Capital Gains Tax Exemption for SMEs

The government has approved the proposal of allowing SMEs to dispose of assets without attracting any capital gains, but with a rider. They will have to invest the proceeds from the sale of assets into their business.

R.P. Singh, Secretary, Department of Industrial Policy and Promotion (DIPP) said, "The finance ministry has given an 'in principle' approval to this proposal. This proposal was a part of the new manufacturing policy released by the government recently. This 'in principle' nod to the proposal would go a long way in enabling a large number of entrepreneurs to raise equity by selling ancestral properties and raise their level of investments and employment. The Labour Department had certain reservations to the idea, citing ILO regulations as benchmarks and sovereign functions as being paramount. These are not sovereign functions, but are statutory functions of the government. The exit mechanism proposed seeks to decouple the disposal of assets from labour dues, a concept that has found favour with the ministry of corporate affairs. Government implementation of liberalisation policy has been sub-optimal so far and the new manufacturing policy aims to finish the agenda of the 1991 reforms. "

Aimed at reducing the government's role in the affairs of business, DIPP had given its approval to third-party audit, to promote self regulation to the extent possible.

The DIPP Secretary expressed hope that the demand for fiscal benefits for skill up gradation by treating it on par with R&D will be acceded to by the Finance Ministry. The policy aims to give 150 per cent weighted deduction on investments in skill up gradation.