"This is a step towards simplification of tax laws, which is expected to bring about transparency and clarity," an official statement said, taking forward the promise made by Finance Minister Arun Jaitley in his budget speech earlier this year.
"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," the statement said.
"Similarly, the sunset dates provided in the (Income Tax) Act will not be extended."
In case of tax incentives with no terminal date, a sunset date of March 31, 2017 will be provided, either for the commencement of the activity or for claim of benefit, depending upon the structure of the relevant provisions of the act.
"A regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion. I, therefore, propose to reduce the rate of Corporate Tax from 30 percent to 25 percent over the next four years," Jaitley had said.
"This process of reduction has to be necessarily accompanied by rationalisation and removal of various kinds of tax exemptions and incentives for corporate taxpayers, which incidentally, account for a large number of tax disputes."
According to the finance minister, the basic rate of corporate tax of 30 percent in India was higher than the rates prevalent in the other major Asian economies, making our domestic industry uncompetitive. But the effective collection was around 23. "We lose out on both counts -- that is, we are considered as having a high corporate tax regime, but we do not get that tax due to excessive exemptions."
Among the various measures the depreciation, currently available up to 100 percent on some assets, is proposed to be reduced to 60 percent from April 1, 2017. The new rate will apply to all the assets, new or old.
Similarly, in the case of capital expenditure, the government intends to do away with weighed deductions, which amount to as mush as 150 percent in some cases such as warehousing facility for farm produce and fertilisers. The government has invited comments from stakeholders within 15 days.
At the Economist magazine�s annual conference here recently, Jaitley had spoken of releaseing a list of corporate tax exemptions it intends to do away with in the coming years.
�In the next few days, we will be coming out with the exemptions we intend to phase out over the next two, three years,� Jaitley had said.
�This will make the corporate tax regime much simpler,� he added. (IANS)