Press Information Bureau
Government of India
Ministry of Finance
26-November-2015 09:44 IST

Date for sending comments by the stakeholders and general public regarding phasing-out plan of deductions under the Income-tax Act extended till 31st December, 2015

A phasing-out plan of deductions under Income-tax Act was placed in the public domain on 20th of November 2015. The stakeholders and general public have been requested to send their comments within 15 days to Director (TPL-III) on mail at dirtpl3@nic.in or by post at Director (TPL III), Central Board of Direct Taxes, Room No. 147G, North Block, New Delhi- 110001.

It is now proposed to extend the time limit for submission of comments to December 31, 2015.

The details of proposed phasing-out of deductions are available on the website of the Department at www.incometaxindia.gov.in.

Comments on this proposal may be sent to Director (TPL-III) on mail at dirtpl3@nic.in or by post at Director (TPL III), Central Board of Direct Taxes,   Room No. 147G, North Block, New Delhi- 110001 by December 31, 2015.

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Press Information Bureau
Government of India
Ministry of Finance
Dated- 20-November-2015
Government Calls for Comments on Proposed Plan of Phasing-Out Exemptions and Deductions under the Income-Tax Act in Order to Bring Down Rate of Corporate Tax from 30% to 25%

Sub:  Finance Minister’s Budget announcement – phasing out plan of deductions under the Income-tax Act – reg.

The Finance Minister in his Budget Speech, 2015 indicated that the rate of corporate tax will be reduced from 30% to 25% 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.

2.      The Government proposes to implement this decision in the following manner:

ü    Profit linked, investment linked and area based deductions will be phased out for both corporate and non-corporate tax payers.

ü    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.

ü    In case of tax incentives with no terminal date, a sunset date of 31.3.2017 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.

ü    There will be no weighted deduction with effect from 01.04.2017.

3.      Based on the above principles, the details of the phasing out plan to be implemented are as under:

(i)          Section 32 : The depreciation under the Income-tax Act is available up to 100% in respect of certain block of assets. The highest rate of depreciation under the Income-tax Act is proposed to be reduced to 60%. This is proposed to be made applicable from 01.4.2017. The new rate is proposed to be made applicable to all the assets (whether old or new) falling in the relevant block of assets.

(ii)         Section 35AD of the Income-tax Act provides for 100% deduction of capital expenditure (other than expenditure on land, goodwill and financial assets) incurred by certain specified businesses such as laying and operating a cross-country natural gas or crude or petroleum oil pipeline network, building hotel (two star and above), warehousing facility for sugar etc. However, in case of a cold chain facility, warehousing facility for storage of agricultural produce, an affordable housing project, production of fertiliser etc. weighted deduction of 150% of capital expenditure is allowed. It is proposed that no weighted deduction will be allowed on any specified business w.e.f 01.4.2017.

(iii)   Section 35AC: No deduction under section 35AC will be available from financial year 2017-18 (Assessment Year 2018-19).

(iv) Section 35 of the Income-tax Act provides for deduction for expenditure incurred on scientific research. It allows for both capital and revenue expenditure and also allows for weighted deduction for donations made to certain institutions/associations/company for scientific research. It is  proposed to provide that –

(a)       deduction under section 35(1)(ii), (iia), (iii) and 35 (2AA) is proposed to be restricted to 100% from F.Y 2017-18, and

(b)         deduction under section 35(2AB) of the Income-tax Act is proposed to be limited to 100% from Financial Year 2017-18 as against 200% available up to 31.03.2017 under the Income-tax Act.

(v) There are certain tax incentives which at present do not have any sunset date for commencement of activity. It is proposed to provide a sunset date of 31.03.2017 for commencement of activity in the following cases:-

A)   Development, operation and maintenance of infrastructure facility [Section 80-IA (4)(i)].

B)   Development of special economic zone (Section 80-IAB).

C)   Export of articles or things or services by a unit located in a Special Economic Zone (Section 10AA).

D)  Commercial production of natural gas in blocks licenced under CBM-IV and NELP VIII. [Section 80-IB(9)(iv)&(v)].

E) Commercial production of mineral oil from blocks licenced under a contract awarded up to 31.03.2011. [Section 80-IB(9)(ii)].

(vi) No weighted deduction is proposed to be provided under Section 35CCC and 35CCD from 01.04.2017. However deduction up to 100% of expenditure referred to therein shall be available.

4. Comments on the aforesaid phasing out plan may be sent within 15 days to Director (TPL-III) on mail at dirtpl3@nic.in or by post in an envelope under the caption “Phasing out of deductions” at the following address:

Director (TPL III),

Central Board of Direct Taxes, Room No. 147G,

North Block,

New Delhi 110001

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0 responses to “Govt. Plan to phase out deductions under Income-tax Act, 1961”

  1. Rajesh,Mumbai says:

    Hon.FM, Do n’t indulge in cheap publicity.before talking about reduction in corporation tax from 30 to 25%.Please stop fooling indian people.corporate Tax is not 30% but it is more than 40%.

    First Abolish Dividend Distribution Tax (DDT) which is nothing but double taxation. Example: X Company earned Rs 1 crore, they have to pay Rs. 30.9 Lacs as Income tax leaving net profit as 69.1 Lacs. Now if company wants to distribute this net tax paid profit, it has to pay Rs.11.75 Lacs more as DDT leaving Rs.57.35 Lacs only for shareholders.

    So effective tax on company works out to be Rs.42.65 Lacs on income of 1 crore or 42.65.

    Need of the hour is to simply Tax laws.

    One more example where government fooled people for last more than 5 Years with annual loot thousand crores.

    On an import of Rs.100/-
    Importers pay 10% Custom Duty (Rs.10).
    It becomes 110/-(100+10)
    On this, further Excise Duty @ 12% paid (Rs.13.2)
    It becomes Rs 123.2 (Rs.110 + 13.2)
    Further,On Custom and Excise duty portion i.e.Rs.23.2 (Rs.10 + 13.2), A total 3% cess of Rs.0/696 was levied which was 0/30 on custom and 0/396 on Excise.
    Further 4% ACD/SAD i.e Rs.4/928 is paid on Rs. 123.2 which is refundable to importers resellers.
    Hence Total Taxes of Rs.28.824 on an import of Rs.100 goes to government as follows.
    Custom Duty Rs.10/00
    Excise Duty Rs.13.20 (Cenvat credit allowable)
    Cess on Custom Duty Rs. 0/30
    Cess on Excise Duty Rs. 0/396
    ACD/SAD Rs. 4/928 ( Refundable as mentioned above)
    ___________
    Total Rs.28.824
    My Query : Why Cess of Rs.0/396 paid on Excise was not allowed as cenvat ?
    In all cases of Excise duty and Service tax there was cess of 3% which was allowed as Cenvat credit but why not for aforesaid.Government continued to loot in such a way. DDT is also such Tax.I request all professionals to draw government attention to many of such double taxation laws and inform them that people are not fools.

  2. rakesh jain says:

    Will deductions be phased out from individual tax also or only from corporate tax?

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