| Sourced From Thehindubusinessline |

Sale proceeds of carbon credits will not escape tax when the new Direct Taxes Code comes into effect from April 1, 2012.

This is because the DTC Bill 2010 has explicitly stated that money received or receivable from transfer of carbon credits will be treated as business income and taxed accordingly. Such a provision if enacted will remove the current uncertainty surrounding the taxation of carbon credits, say tax experts.

Ambiguous

In the existing income tax law, there is no explicit provision that brings transfer of carbon credits under the tax net. In the absence of an explicit provision, there were disagreements between companies and the tax department on the taxability of carbon credits.

It was often contended that cash credits were in the nature of capital receipts and therefore could not be subjected to income tax. There were also sections that considered carbon credits as revenue receipts and hence felt that it should be subjected to tax.

The availability of tax incentives (profit linked deductions) for certain industries also complicated the issue of taxability of carbon credits.

However, the DTC Bill has now proposed to move away from profit linked deductions in respect of most segments except in the case of SEZ developers and SEZ units.

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4. I-T dept mulls tax on carbon credits
5. Don’t buy those carbon credits just yet

Tags: carbon credits, Carbon Emissions, Carbon Tax, India carbon