With the Income Tax (IT) authorities deducting taxes from the interest accrued from the deposits in the District Mineral Foundation (DMF) accounts, the Odisha Government has urged the Government of India to exempt DMF fund from taxation range.
The DMF is in operation in all the 30 districts of the State in terms of provision of Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY).
Nearly Rs12, 000 crore is available with the DMF for taking up of developmental projects in the mining affected zones of the State. These funds are placed in banks and accruing interest.
While substantial amount of interest is being accrued out of the funds of the DMF Trusts kept in bank accounts, this amount is to be utilised for interest and benefit of the people in mining affected areas, said sources in the State Government.
Unless the DMF Trusts are exempted from the purview of IT, there is likelihood that a substantial amount of DMF funds will be spent for clearance of the tax liability, said a senior official in the Department of Planning and Convergence of the State Government.
Against this backdrop, the Odisha Government has requested the Union Ministry of Finance for exemption of IT on the interest income of DMF from bank deposits.
The Ministry of Finance has also been approached for elimination of cess and surcharge on the customs duty and direct taxes.
While Article 270 of Constitution of India provides for sharing of the proceeds of all Union taxes between the Union and States, the cess and surcharge collected is not distributed among the States.
The share of cess and surcharge in gross tax revenue of the Union Government increased from 7.53 per cent in 2000-01 to 13.14 per cent in 2013-14.
While the State share in Central taxes is reduced due to reduction of Excise duty, cess is not shared with the State.
Accordingly, the State Government has urged the Union Government to take steps making cess and surcharges part of the divisible pool, so that the States will be benefitted.