ASSOCHAM demands lower tax rate for healthcare sector

Apex chamber ASSOCHAM has called for steamlining policies and tax holidays to boost healthcare facilities across the country, especially in tier two and tier three cities.

Due to huge capital outlay involved in setting up, hospitals may take four to five years to break even. As the deduction is available for five consecutive years from the previous year in which the hospital starts functioning, they will not be able to obtain the benefit of tax holiday.

It is therefore necessary to extend the tax holiday benefit to enable companies to commit substantial investments required in the healthcare sector. This will also lead to growth of tourism and associated industries, said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

Further, 100 per cent deduction should be available to an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India. At present, certain urban areas are excluded.

The tax break should be for 10 years, or hospitals should have an option to select five consecutive years from the initial 10 years of starting operations, said ASSOCHAM in its pre-Budget memorandum for 2011-12.

It said the percentage of weighted deduction on contributions made to an exclusive research and development (R & D) company should be increased from 125 to 175 per cent.

The existing rules do not specify if expenses incurred outside the R & D facility