Govt unveils roadmap for phasing out corporate tax exemptions

The government on Friday announced a comprehensive roadmap for phasing out corporate tax exemptions as it looks to make Indian tax rates more competitive.

Finance minister Arun Jaitley, in this year’s budget speech, said the government will reduce corporate tax rates to 25% over the next four years from 30% at present. But this would be accompanied by a corresponding phase-out of exemptions and deductions, bringing greater clarity to tax laws, he had said.

In a statement on Friday, the tax department said that profit-linked, investment-linked and area-based deductions will be phased out for both corporate and non-corporate tax payers.

In addition, the government will not allow the unset date for TAN incentives to be advanced. In the case of incentives that have no sunset date, a sunset date of 31 March 2017 will be provided either for commencement of the activity or for claiming benefits, depending on the income tax act provisions.

Also, there will be no weighted deduction with effect from 1 April 2017.

The government has sought stakeholder feedback on this roadmap over the next two weeks. It also plans to bring in these changes starting from the next budget.

At present, India gives tax holidays to various sectors including power generation, distribution and transmission and special economic zones (SEZ) and telecom. Tax holidays are also given for setting up manufacturing units in the North-East and some special category states like Jammu and Kashmir and Himachal Pradesh.

According to the revenue foregone statement in the budget, the revenue impact of major incentives given to the corporate sector, including tax holidays and accelerated depreciation, in the current fiscal is more than Rs.62,000 crore.

Source : Livemint