Tuesday, February 28 2006 23:54 Hrs (IST) - World Time -

New Delhi: Tax exemptions enjoyed by profit making cooperative banks, financial institutions like NHB, Nabard and Sidbi will be withdrawn.

Presenting the Budget in Parliament, Finance Minister P Chidambaram attempted to prevent misuse of tax laws and decided to tax "anonymous and pseudonymous" donations received by charitable trusts, hospitals, universities, education and medical institutions.

Purely religious trusts will continue to enjoy the exemption, he said. He also proposed withdrawal of exemption on capital gains arising from transfer of long term capital assets on listed shares or mutual funds like UTI when they invested in shares as provided in Section 54ED of Income Tax Act.

Similarly, Chidambaram lifted the tax sops under Section 54EC enjoyed by Nabard, National Housing Bank and Sidbi. Only National Highway Authorities and Rural Electrification Corporation will continue to get the tax breaks.

Profit making Cooperative banks will lose the tax breaks enjoyed by them under Section 80P of the I-T Act.

However, primary agriculture credit societies and primary cooperative agriculture and rural development banks will continue to retain the exemption. Chidambaram also proposed withdrawal of exemptions on certain incomes of Investor Protection Fund.

At present, any income of investor protection funds set up bourses are exempt as provided under Section 10 of Income Tax Act. However, government proposed that only the contribution received from bourses and members will be exempted. The income earned from investment by such funds is to be taxed.