Budget 2001: Full Coverage

These telecasting companies will now have to pay taxes on par with IndiaInc. Benefiting for years from the presumptive profit and taxationprovision, these TV companies are now set to lose the protection benefitsand be brought on par with domestic telecasting companies. Admits Mr PeterMukerjea, CEO, Star (India), said: ``We were expecting this for a while.''

Adds Mr Kunal Dasgupta, CEO, SET: "We have already been paying a presumptivetax but we will be paying more now with this announcement.''

The ``presumptive profit'' provision was worked out in 1996 for FTCs to givethem tax relief, keeping in view the fact that they were making losses inglobal operations and it was a new line of business for them. However, thegovernment has now clearly decided to put an end to what was adiscriminatory practice.

Here's why: the presumptive profit for FTCs is taxed at the normal rate butthe total amount of tax works out to be marginal because of the way theirprofits are calculated. For example, the rate of taxation between 1995-96and 1997-98 was 55 per cent and from 1998-99 onwards it was 48 per cent. Butthe effective tax-rate for FTCs worked out to just 3.8 per cent during1995-96 and 1997-98 and 3.36 per cent for 1998-99 onwards, because of the 10per cent ``presumptive profit'' criterion.

Domestic telecasting companies thus pay a much higher tax based on theiractual earnings. With Mr Yashwant Sinha's announcement to bring the FTCs onpar with Indian companies the government has withdrawn the sop. Given thatFTCs have paid a total of only Rs 71.21 crore as income tax during the pastfour assessment years-Mr Sinha should now see a spurt of revenues frombroadcasters.