The object of the Bill is to impose a special tax on the total amount of interest received by the schedule banks on loans and advance made in India. However, interest on Government securitities as also debentures and other securities issued by the local authorities, companies and statutory corporations will not be included in the tax base. Interest received on loans and advances made to other scheduled banks will likewise be exempted from the proposed levy. The tax will be levied at the rate of seven per cent. on the chargeable amount of interest. Interest acruing or arising before 1st August, 1974 will not be liable to tax. The tax will be allowed as deduction in computing the taxable income under the Income-tax Act, 1961.The tax is expected to have both monetary and fiscal impact inasmuch as it will serve the purpose of raising the cost of borrowed funds and supplementing Government revenues. - Gazette of India, 2-9-1974, Pt. II, S.2, Ext., p. 953.[23rd September 1974.]An Act to impose a special tax on interest in certain cases.BE it enacted by Parliament in the Twenty-fifth Year of the Republic of India as follows:-
