Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers’
The government on Friday announced its roadmap towards phasing out corporate tax exemptions, a commitment made by Finance Minister Arun Jaitley in his Budget speech.
The Finance Minister had promised the dual actions of reducing the corporate tax rate from 30 per cent to 25 per cent in a gradual manner, and the removal of corporate tax exemptions.
“Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers,” a release by the Central Board of Direct Taxes said.
The CBDT added that the provisions with a sunset date will not be modified to advance the sunset date and the sunset dates provided in the Income Tax Act will not be extended.
Regarding tax incentives with no date of termination, the CBDT proposes a sunset date of March 31, 2017, adding that there will be no weighted deduction with effect from 01. 04.2017.
During his Budget speech in February, Mr Jaitley had raised the issue of India’s perceived high corporate tax and large number of exemptions. He said at the time that India lost out on both counts—not only was it perceived to have a high corporate tax rate, but it did not benefit from this in any real sense because of the high number of exemptions.
Reducing the corporate tax rate and bringing a systematic approach to taxation in general is viewed as one of the way India can improve its Ease of Doing Business Score. The Finance Minister is expected to announce the new corporate tax rate in the upcoming Budget.
The government has invited comments on these proposals for the next 15 days.
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