TAX CONSIDERATION FOR SETTING UP A NEW BUSINESS While setting up a new business, one has to consider the location

of the busines s and the nature of the business. A number of factors have to be taken into cons ideration in deciding about the location and nature of the business. Tax factor also plays an important role in taking such decision. Location of the New Business:-The tax incentives which are available with regard to the location of the business are as follows: Tax Holiday for New Industrial Units situated in Free Trade Zone:-100% of the pr ofits, derived from industrial undertaking, are allowed to be deducted in comput ing its taxable income. Tax holiday period is available up to assessment year 20 09-2010. From the assessment year 2003-2004 an industrial undertaking set up in Special E conomic Zone is entitled to claim 100% deduction in respect of its profit for th e first 5 year and 50% for the next 2 year. 50% deduction is further continued f or 3 year, provided so much of the amount as does not exceed 50% of its profits is debited to profit and loss account and credited to Special Economic Zone Re-inve stment Allowance Reserve Account to be used within 3 year for specified purposes. Form the A Y 2006-2007, to tax holiday for profits derived form the export of ar ticles or things manufactured in units set up in Special Economic Zone is availa ble for 15 year, 100% during the first 5 year.50% of its profits is debited to p rofit and loss account and credited to Special Economic Zone Re-investment Allowanc e Reserve Account to be used within 3 year for specified purposes. 1.Profits derived from Operating Industrial Park or Special Economic Zone. Any undertaking deriving profits from operating or maintaining Industrial Parks orSpecial Economic Zone is allowed 100% deduction in respect of its profit for 1 0 assessment year subject to certain conditions. 2. Profits from Industrial Undertaking located in the State of Jammu and Kashmir . 100% deduction is allowed in respect of profits derived from industrial undert aking located in Jammu and Kashmir for the first 5 year and thereafter for the n ext 5 year @30% for company assessee and 25% for non-company assessee.. Tax holiday period for setting up new industrial undertaking has been extended u p to 31 Mach 2012. 3. Profits form certain Undertakings or Enterprises in certain Special Category States. 100% deduction is allowed in respect of profits derived form certain und ertakings or enterprises set up by the end of March 2012 in certain special cate gory States for 10 assessment year. 4. Profits and Gains form Business of Hotels and Convention Centres. 100% is all owed for 5 consecutive assessment year for the profits from the business of hote ls and convention centers. Set up during the financial year 2007-2008 to 2009-20 10 in the National Capital Territory of Delhi, districts of Faridabad, Gurgaon, Gautam Budh Nagar and GhaZiabad. 5. Profits and Gains from certain Undertakings in North-Eastern States. 100% ded uction is allowed for 10 consecutive assessments for the profits from undertakng s set up in North-Eastern States during the financial year 2007-2008 to 2016-201 7. Nature of the Business:-The following tax incentives ate available with regard t o the nature of the business: 6. Agricultural Income. Agriculture is also treated as a business activity. Agri cultural income is fully exempt from tax, though it is partially integrated with non-agricultural income to determine the rate of tax applicable to non-agricult ural income. Dividends and Long-term Capital Gains accruing to Venture Capital Fund or a Vent ure Company. Any income of a venture capital company or venture capital funds se t up to raise funds for investment in a venture capital undertaking is exempt fr om tax. 7. Tax holiday for 100% Export-oriented Undertaking. 100%of the profits derived from 100% export-oriented undertaking is deducted in computing its taxable incom e. Tax holiday period is available up to the assessment year 2009-2010. 8. Tax holiday for Industrial Units situated in Free Trade Zone. 100% of the pro

fits derived from such industrial undertaking is deducted in computing its taxab le income. Tax holiday period is available up to the assessment year 2009-2010. 9. Tax holiday for Units set up in special Economic Zone for 15 year. 10. Tae Development Account. Where a person is engaged in growing and manufactur ing tea in India and he has made a deposit within specified time-lime with presc ribed institutions he is allowed the following deduction in computing business i ncome: (a) deposit made; or (b) 40% of profits from such business, without allowing deduction under this Sec tion,Whichever is less, is allowed to be deducted 11. Profits from Prospecting Certain Mineral. Where an assessee is engaged in Lo cating, proving and prospecting mineral deposits, listed in the Seventh Schedule , revenue expenditure incurred in this connection in the year of commercial prod uction and four years prior to this, is allowed to be deducted over 10 previous years. 12. Amortisation of Telecom Licence Fees. Every assesseee is entitled to claim d eduction in respect of capital expenditure incurred for axquiring the licence to operate telecommunication services. The deduction is allowed over the relevant previous years, beginning with the previous year in which the licence fee is act ually paid and ending with the previous year in which the licence period is over .. 13. Special Reserve created by Financial Corporation. Where any reserve is creat ed and maintained by a specified entity for specified project, it is entitled or deduction either for (i) resave so created: or (ii)20% of the profits derived f rom such long-term finance, whichever is less. 14. Business of Civil Construction. Where the receipts from the business of civi l construction does not exceed Rs 40 lakh, the taxable income from such business is computed on deeming basis-8% of the receipts from such business. The assesse e in not required to maintain any accounts. 15. Business of Plying, Hiring or Leasing of Goods Carriage. Where an assessee i s engaged in the business of plying, hiring or leasing of goods carriage and he does not posses more than 10 trucks, taxable profits from goods carriage will be computed on deeming basis- i.e (i) Rs 3500 per month or part thereof for each h eavy truck; and (ii) Rs 3150 per month or part thereof for any other truck. The assessee is not required to maintain books of accounts. It is operative form the assessment year 2003-2004 and subsequent Year. 16. Income of retail Business. Where an assessee is engaged in the businessof retai l trading of good or merchandise and the gross receipts from such business does not exceed Rs 40 lakh, his income is computed on deeming basis-5% of the total t urnover. He is not required to maintain the books of accounts. 17. Profits from Industrial Undertakings or Enterprises engaged in Infrastructur e Development. 100% derived from the business of generation or profits from infr astructure facilities, started on or after 1 April 1995 for 10 consecutive asses sments year out of 15 year in which facility starts operating. 18. Profits derived from Generation/Distribution of Power. 100% deduction is all owed for profits derived from the business of generation or distribution of powe r or substantial renovation and modernization of the existing network of transmi ssion or distribution lines for 10 assessment years for undertakings, set up to 31 March 2010. 19. Profits from the Business of Processing, Preservation and packaging of Fruit s or Vegetable or form Integrated Business of Handling, Storage and Transportati on of food Grains. 100% of such profits are allowed to be deducted for first 5 a ssessment year and thereafter a company-assessee id allowed 30% of such profits and a non-company assessee 25% of such profits for next 5 assessment years, subj ect the conditions on this behalf. 20. profits from Operating Cross-country Natural Gas Distribution Network.100% d eduction is allowed for 10 consecutive assessment years out of 25 year for under takings set up on after 1 April 2007 for the profits from operating cross-countr y natural gas distribution system.

21. Profits from an Undertaking/Enterprise engaged in Development of Special Eco nomic Zone. An undertaking/enterprise, enaged in the business of developing Spec ial Economic Zone, is allowed 100% deduction from such business for 10 consecuti ve assessment years out 15 year, beginning from the year in which Special Econom ic Zone has been notified. 22. Profit form Business of Collecting and Processing of Biodegradable Waste. Wh ere an assessee is engaged in the business of collecting and processing or treat s or for producing bio-gas or making pellets or briquettes for fuel or organic m anure, the whole or profits from such business is deducted in computing business income. Tax holiday is allowed for five assessment years. It is operative from the assessment year 2000-2001.