Question

Explain the various tax benefits available to small scale industries in india.

Answer 1

There are various benefits that small scale industries have regarding the tax.
If the industry profit is upto  6% per annum of their capital employed, then it is exempted from paying of income tax under section J of income tax act 1961. But this is allowed only for the 5 years after the  start of production.
If a small scale  business is destroyed due to natural disasters or due to civil disturbance or the some accident like fire etc, it  will receive a rehabilitation allowance .Moreover different tax concession is available for the small scale industries in the country.

Answer 2

Some of the tax benefits available to small scale industries in India are:

1. Tax holiday - The small scale industries need not pay income tax on a certain percentage of profits for five years from the date of commencement of production.

2. Depreciation - They are entitled to a deduction of maximum Rs. 20 lakhs for depreciation on plant and machinery.

3. Rehabilitation allowance - A rehabilitation allowance is granted to them in case their business is discontinued due to a natural calamity, civil disturbance or accidental fire.

4. Investment allowance - They are given an investment allowance at the rate of 25% of the cost of acquisition or installation of a new plant or machinery.

5. Expenditure on scientific research - They are entitled to deductions in respect of expenditure on scientific research.

6. Amortization of preliminary expenses - They are allowed to write off their preliminary and developmental expenses.

7. In the backward or rural area - A small scale unit set up in a backward or rural area is given a deduction of 20% on its profits.

8, Expenditure incurred by the small scale industries in obtaining a patent and copyright is deductible from their income.

9. If a small scale industry earns profits from the publication of books, 20% of the profits earned can be deducted from the gross total income.

10. Deductions can also be availed for royalties from any company in India, royalties from certain foreign companies, inter-corporate dividends, income of co-operative societies and carry forward and set-off business losses.