Corporate exemptions may be reviewed in Direct Tax Code
March, 26th 2007
Tax exemptions to India Inc may be trimmed in the proposed Direct Tax Code, official sources said. Review of tax exemptions to the corporate sector would be in tune with finance minister P Chidambarams focus on plugging revenue losses. The issue was also taken up in Budget 2007-08, certain excise exemptions were removed.
In 2006-07, the government is estimated to lose out on revenue worth Rs 50,075 crore due to incentives and deductions to corporate taxpayers.
A finance ministry official said, Reviewing exemption is an ongoing process and it is likely to be continued under the Direct Tax Code. Further, the ministry is also of the opinion that companies have only an effective tax rate of about 19% due to a number of exemptions, and reducing them would go a long way in boosting corporate income tax collections.
The Code contains various amendments to the current Income Tax Act. One of its key objectives is to simplify the Act.
It is likely to contain a number of provisions regarding restructuring of income tax slabs as well provisions regarding international taxation. It is likely to be presented in Parliament in the monsoon session or later during the year, sources said.