Excerpts from the Budget Speech of the Union Finance Minister, Government of India delivered in the Lok Sabha and related to S&T and ITare reproduced for the benefits of ITT Readers.
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HIGHLIGHTS OF THE BUDGET SPEECH

 Weighted tax deduction of 125% of the expenditure made on in-house R&D u/s 35(2AB) of I.T. Act extended upto 31.03.2005.

 2 high level committees formed to review the process of drug policies so as to reduce the rigors of price control and also to identify required support to Indian pharmaceutical company to undertake domestic R&D.

Foreign direct investments in drugs and pharmaceutical sector allowed upto 74% equity under automatic route.

 

National Foundation Fund announced for helping innovators all over the country with a initial corpus of Rs.20 crores to build national register of innovations, mobilise intellectual property protection, set up incubators for converting innovations into viable business opportunities and help in dissemination across the country.

 

Technology Mission on Vaccines announced.

 Our country is endowed with diverse and precious genetic resources, which need to be prudently conserved and managed. Among the 18 hot spots of bio-diversity in the world, two happen to be in India, in the Eastern Himalayas and the Western Ghats respectively. To coordinate policies, research, documentation and legal protection of the country’s rights in this important area, a National Bio-resources Board (NBB) will be set up under the Chairmanship of the Minister of Science & Technology.

HIGHLIGHTS FROM THE FINANCE BILL

 Amendments proposed to section 35 of IT Act to seek to allow a weighted deduction of one and one-fourth times of any sum paid to scientific research association or to a university, college or other institutions for the purpose of clause (ii) and clause (iii) of the said section. It is also proposed to vest the authority for approval for the purpose of the above clause in the Central Government.

 Under the existing provision of sub-section (3), if any question arises whether any activity constitutes or any asset is being used for scientific research, it is referred by the Board to the prescribed authority whose decision is final. It is proposed to provide that when the question relates to any activity under clause (ii) and (iii) of sub-section (1) it shall be referred by the Board to the Central Government and the decision of Central Government is final.

It is also proposed to provide that where such question relates to any activity other than those specified clause (ii) and (iii) of sub-section (1), the same shall be referred by the Board to the prescribed authority and the decision of the authority thereon shall be final.

 Goods developed and patented by national laboratories, public funded research institutions, colleges and universities and manufactured by Indian companies are being extended exemption from excise duty for a period of three years.

 The provision of deduction under section 80 (IA) (4B) moved to 80 (IB) (8) which provides for the following:

The amount of deduction in the case of any company carrying on scientific research and development shall be hundred per cent of the profits and gains of such business for a period of five assessment years beginning from the initial assessment year if such company

(a) is registered in India;

(b) has the main object of scientific and industrial research and development;

(c) is for the time being approved by the prescribed authority at any time before the 1st day of April, 1999.

 To bring together research and development institutions and industry for overall development of technology and its commercial applications, it is proposed to provide 100% deduction for donations made to the Fund for Technology Development and Applications being operated by the Technology Development Board.

 Deduction in computing the profits and gains of business profession, of any expenditure incurred, wholly and exclusively to make the existing computer system, Y2K complaint, on or after 1st April 1999 but before 1st April 2000.

 It is proposed to insert a new clause (23FA) in Section 10 to provide that any income by way of dividends or long term capital gains of venture capital fund or a venture capital company from investments made by way of equity shares in a venture capital undertaking will not be included in computing the total income.

- The venture capital fund or the venture capital company would require the approval of the Central Government in accordance with the rules made in this behalf and would also be required to satisfy the prescribed conditions before being able to avail this exemption. Such approval of the Central Government will have effect for the number of assessment years prescribed in the order of approval. However, at one time the approval can be for a maximum number of three assessment years.

- The expression "venture capital undertaking" is being defined to mean a domestic company whose shares are not listed in a recognised Stock Exchange in India. The business in which the undertakings may be engaged are software; Information Technology; production of basic drugs in the pharmaceutical sector; bio-technology; agriculture and allied sectors; such other sectors as may be notified by the Central Government in this behalf or production and manufacture of any article or substance for which patent has been granted to the National Research Laboratory or any other scientific research institution approved by the Department of Science and Technology.

 The basic customs duty on a number of items used in the IT sector has been reduced/ rationalised as follows:

- Telecom transmission apparatus, telephonic or telegraphic switching apparatus, reduced from 30% to 25%.

- All storage devices rationalised at 5%.

- All IC’s and micro-assemblies and microprocessors for computers (other than motherboards), rationalised at 5%.

- Parts of computers (other than PPCB’s), reduced from 10% to 5%.

- CD-ROMs, reduced from 10% to 5%.

- Specified prepared media, reduced from 40% to 25%.

- Diodes, transistors, other semi-conductor devices and specified electronic components, reduced from 20% to 15%.

- Specified raw material and inputs for electronic industry, reduced from 10% to 5%.

• Additional inputs for semiconductor devices, ceramics dielectric (multilayer) capacitors, tantalum capacitors and other specified electronic components included for the concessional basic customs duty 5%.

• Specified (75 no.) machinery for semi-conductor manufacture exempted from basic customs duty.