Industrialist Ash rides high on wind

If you were surprised to learn that film star Aishwarya Rai has invested about Rs11 crore to set up a greenfield wind power project in the border district of Jaisalmer in Rajasthan, don't be.

The decision to set up the Aishwarya Rai wind farm was not prompted only by altruism or by love for the beautiful desert state, but by simple taxation logic. The farm produced more than 28 lakh units of power in its first year

Tax laws provide for full exemption on profits from wind farms for 10 years. This tax break is available under section 80-IA, which deals with deductions in profits and gains from industrial undertakings or enterprises engaged in infrastructure development.

Sub-section (1) says: Where the gross total income of an assessee includes any profits and gains derived by an undertaking or enterprise from any business referred to in sub-section (4) (wind farms are eligible), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100 per cent of the profits and gains derived from such business for 10 consecutive assessment years.

Simplified, this means that if you invest in a wind farm project anywhere in India, the profit you make from the venture will not be taxable for 10 years.

In Rai's case, if we assume, for the sake of illustration, that she makes a nominal 10 per cent profit on her investment every year, she will have a cool tax-free income of Rs1.1 crore every year for the next 10 years. That is way above the returns being offered on any savings or financial instrument in the market at today's rates.

Clearly, the star is a beauty with a good financial brain.