Budget 2016-17 changes in income tax for corporates (corporate tax)

Posted on 10 April 2023 Category : Income Tax

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The extract of Indian Union Budget 2016-17

In any case the effective rate of tax paid by companies comes to an average of 24.67 % because of various exemptions which they are availing of. A phasing out plan of removing these exemptions and tax incentives was placed in public domain and we have received a large number of constructive suggestions.

The final plan of phasing out exemptions is given in Annexure. The highlights are as follows:-

(a) The accelerated depreciation provided under IT Act will be limited to maximum 40% from 1.4.2017.

(b) The benefit of deductions for Research would be limited to 150% from 1.4.2017 and 100% from 1.4.2020.

(c) The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020.

(d) The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020.

The reduction in corporate tax rate has to be calibrated with additional revenue expected from the incentives being phased out. The benefits from phasing out of exemptions are available to Government only gradually. In the first phase, therefore, I propose the following two changes

in corporate income-tax rates:-

(a) The new manufacturing companies which are incorporated on or after 1.3.2016 are proposed to be given an option to be taxed at 25% + surcharge and cess provided they do not claim profit linked or investment linked deductions and do not avail of

investment allowance and accelerated depreciation.

(b) I also propose to lower the corporate income tax rate for the next financial year of relatively small enterprises i.e companies with turnover not exceeding `5 crore (in the financial year ending March 2015), to 29% plus surcharge and cess.

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