In the General Budget 2011-12, the benefit of investment linked deduction has been extended to businesses engaged in the production of fertilizers. Presenting the Budget, the Union Finance Minister, Shri Pranab Mukherjee in the Lok Sabha today said that the step is aimed at giving a boost to production in the agriculture sector. Such deduction will also be available to those who develop affordable housing under a notified scheme.

The rate of tax on dividends received by an Indian company from its foreign subsidiary has been lowered to 15 per cent for improving flow of such funds into India.

Additional deduction of Rs.20,000 for investment in long term infrastructure bonds has been extended for one more year.

The weighted deduction on payments made to National Laboratories, Universities and Institutes of Technology, for scientific research has been enhanced to 200 per cent from the earlier 175 per cent.

The Finance Minister has also announced the creation of special vehicles in the form notified infrastructure that funds to attract foreign funds for financing of infrastructure. Interest on the borrowings of these funds will be subject to a reduced to with holding tax rate of 5 per cent instead of the current 20 per cent. The income such funds will be exempt from tax.

Infrastructure fund tax exemption enables foreign investment with reduced withholding on interest and exempt income for notified SPVs. Extension of investment linked deductions to fertilizer production and to specified affordable housing schemes; reduction of tax on dividends from foreign subsidiaries to 15%; extension of an additional deduction for long term infrastructure bond investments; increase of weighted deductions for payments to specified research institutions to 200%; and establishment of notified infrastructure funds whose income is tax exempt and whose interest payments bear a reduced withholding tax rate of 5%.