Govt unveils plan to phase out corporate tax exemptions

20 November 2015

The government today unveiled a comprehensive proposal for phasing out exemptions and deductions for corporates under the Income-Tax Act, as part of the process of bringing down corporate tax rate from 30 per cent to 25 per cent and make Indian tax rates more competitive.

Finance minister Arun Jaitley had, in his budget speech 2015, indicated that the rate of corporate tax would be reduced from 30 per cent to 25 per cent over the next four years along with corresponding phasing-out of exemptions and deductions.

This is a step towards simplification of tax laws, which is expected to bring about transparency and clarity.

The government proposes to implement this decision in the following manner:

  • Profit-linked, investment-linked and area-based deductions will be phased out for both corporate and non-corporate tax payers.
  • The provisions having a sunset date will not be modified to advance the sunset date. Similarly, the sunset dates provided in the Act will not be extended.
  • In case of tax incentives with no terminal date, a sunset date of 31 March 2017 will be provided either for commencement of the activity or for claim of benefit, depending upon the structure of the relevant provisions of the Act.
  • There will be no weighted deduction with effect from 1 April 2017.

At present, the government allows tax holidays to various industrial 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 Rs62,000 crore.

The details of the proposed phasing out of deductions are available on the website of the Income Tax Department at

The government has sought comments on the proposal, which can be sent within 15 days to Director (TPL-III) on mail at or by post at Director (TPL III), Central Board of Direct Taxes, Room No 147G, North Block, New Delhi- 110001.

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