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Tax Benefits and Schemes for the Food Processing Industry
Our Bureau
Date of posting: 21-02-10
      The Government has taken necessary steps to rationalize and simplify the tax structure for the food processing industry, the Mnistry for Food Processing Industries has informed. The tax benefits are for companies in the business of processing, preserving and packaging of fruits or vegetables and other perishable products or meat.

      One part is a 100% tax exemption for the first five assessment years, beginning with the initial assessment year, a measure which would be available under section 80-1B(11A) of the Income Tax Act, 1961, to undertakings deriving profit from the business of processing, preserving and packaging of fruits or vegetables and new units in the business of processing, preservation and packaging of meat or meat products or poultry or marine or dairy products.

      Another aspect under sub-section (11A) of section 80-1B of the Income-tax Act, 1961, is a deduction from profits upto specified amounts is allowed in the case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or from the integrated business of handling, storage and transportation of food grains subject to specified conditions, if such undertaking begins to operate such business on or after the 1st day of April, 2001.

      With a view to preserving perishable food items like milk, poultry and meat, the Finance (No.2) Act 2009 has amended sub-section (11A) of section 80-1B with effect from 01.04.2010 to also provide tax holiday in respect of the business of processing, preserving and packaging of meat and meat products and poultry, marine and dairy products for units which begin to operate such business on or after 1st April, 2009. The amount of deduction in a case of an undertaking deriving profit from the business of processing, preservation and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage and transportation of food grains, is hundred per cent of the profits and gains derived from such undertaking for five assessment years beginning with the initial assessment year and thereafter, twenty-five per cent (or thirty per cent where the assessee is a company) of the profits and gains derived from the operation of such business in a manner that the total period of deduction does not exceed ten consecutive assessment years and subject to fulfillment of the condition that it begins to operate such business on or after the 1st day of April, 2001.

      The Food Processing Units could be both in the organized as well as the unorganized sector. The Small Scale and unorganized sector constitutes about 70% of the food processing sector.

      For promoting the food processing industry, the ministry has established two schemes, one for technology focussing on the creation of new processing capacity and up-gradation and modernization of existing processing capabilities, and a second scheme for Human Resource Development which focuses on developing technologists, managers, entrepreneurs and manpower for quality management in food processing.

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