The Finance Minister in his Budget Speech for 2015 indicated that the rate of corporate tax will be reduced from 30% to 25% over the next four years along with the corresponding phasing out of exemptions and deductions. The Central Board of Direct Taxes on 20th November, 2015 issued a press release, announcing this would be a step towards the simplification of tax laws, thus bringing 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 taxpayers. They will be allowed to expire and will not be extended, the Government said, confirming that temporary tax breaks will not be repealed before their scheduled expiry date.
- Permanent tax breaks that are proposed to be repealed would be revoked from March 31, 2017.
- Finally, there will be no weighted deduction with effect from April 1, 2017. Currently, section 35AD of the Act provides for 100 percent deduction of capital expenditure incurred by certain specified businesses, whereas in other businesses, a weighted deduction of 150 percent of capital expenditure is allowed.
