NEW DELHI: Indian experts demanded to government tax benefits for education sector which is the backbone of country’s economy.
The key expectations from Budget include the following: easing the rules applicable to educational institutions raising overseas low cost funding, introducing income-tax holiday benefits for entities engaging in development of educational infrastructure, expanding the ambit of service tax exemptions for input services procured by an educational institution, increasing tax deduction for individual taxpayers on fees paid for education of children, providing tax rebates on income earned by teachers and professors and increasing tax deductions on donations made to educational institutions.
The education sector is highly regulated and one of the key aspects that are governed is the minimum infrastructure that needs to be possessed by the institution. Universities, for instance, need to acquire land in the range of 25-50 acres along with significant built-up infrastructure. In light of rising land and construction costs in the country, the ability for institutions to create top-quality educational infrastructure depends to a large extent on obtaining leveraged funds. Given that domestic bank borrowing rates are in the range of 10 per cent to 14 per cent, the government could permit educational institutions to access overseas finance that is available at much lower servicing rates (around 4-5 per cent). Trusts or Societies operating educational institutions are today not permitted to raise foreign exchange borrowings (termed as External Commercial Borrowings) without prior regulatory approvals and relaxing this rule could be a much needed shot in the arm for institutions to develop or improve existing infrastructure. Further, increasing the tax deduction available for donations made to educational institutions from 50 per cent to 100 per cent of the donation amount could aid in raising funds from within India as well.
With an aim to encourage development of education infrastructure, the government could also draw upon international precedent on development of Special Education Zones or Knowledge Hubs, which are basically delineated geographical areas similar to Special Economic Zones (SEZ), but dedicated to education infrastructure (e.g. Dubai International Academic City). Experience has shown that the whole is often greater than the sum of its parts – a self-sustaining education ecosystem that creates capacity for operation of universities, centers of excellence, research labs, innovation hubs, schools, etc. will go a long way in improving the quality of education in the country. Entities engaging in development of such infrastructure need to be fiscally rewarded and an income-tax holiday benefit and other indirect tax benefits (similar to those available for developers of SEZs) are recommended.