CII’s Budget recommendation to government seeks higher depreciation rate for ec-friendly vehicles

In view of the global initiatives on Climate Change and Sustainability, for the first time, CII has made specific recommendations for the Union Budget which is aimed at the issue of environment – the most important from the point of view of the auto industry is that people should be encouraged to use environment-friendly petrol private cars with low emissions and high-fuel efficiencies thus allowing a higher rate of depreciation being offered to buyers of environment-friendly petrol private cars.

 

Since the installation of energy efficient technologies often involves signification costs, therefore in addition to the accelerated depreciation, which is provided currently, a tax credit should be provided equal to 150% of expenditure incurred on cost and installation of energy saving technologies.  Second, for promoting installation of energy conservation/improvement technologies in the real estate sector, which has the potential to generate sizeable gain for environment, tax deduction should be given to individuals for undertaking such investment in the house/property they are living in and also to builders who invest in these technologies while constructing green buildings.

 

Third, it has been observed that tax deduction has always stimulated individuals to save or invest more. Therefore, CII has recommended that tax incentives should be given to an individual for investing in companies engaged in generation of renewable energy or such other businesses resulting in water efficiency, carbon emission reduction, etc., that would result in higher cash flow to these industries. The benefits could be given by way of tax deduction or reduced rate of capital gain on transfer of shares in these companies; tax free bonds, which may be issued by these companies; etc.

 

Fourth, the benefits of tax holiday under section 80IA of the ITA could be extended to undertakings engaged in the manufacture of advanced energy efficient products, manufacturers of equipments used in solar, wind, and other environment friendly resources.

 

Fifth, water being in short supply, there is need for measures which would ensure efficient use. CII has therefore, recommended that tax credits may be given to encourage water users to invest in (1) the construction of impoundments to use available surface water, thereby reducing their dependence on ground water; (2) the conversion from ground water use to surface water use; and (3) land leveling to reduce agricultural irrigation water use.  These may include an income tax deduction of 50% of the project cost incurred in the construction, installation or restoration of impoundment; income tax credit of 10% of the project cost maybe given for the conversion from ground water use to surface water use; and for agricultural land leveling projects that conserve irrigation water, an income tax deduction of 10% of the project cost may be provided.