Tax on Businesses

♤ Most tax deductions, such as those offered on export profits, will be removed. In some cases, existing units can continue to avail of incentives currently offered for the period that

was originally specified (i.e. grandfathered). New units however, will be offered only incentives available in the Code.

♤ The Bill does away with a number of tax incentives in the Act and introduces investment linked incentives for sectors such as SEZ development, power, oil and natural gas exploration and cold chains. That is, cumulative profits up to the amount of capital investment will be eligible for exemption. Certain incentives existing under the Act will be grandfathered.

♤ The Bill states that income from separate businesses shall be computed differently. A business shall be distinct if there is no connection or interdependence between the businesses, or if they are at different locations.

♤ The Act also prevented business losses to be carried forward for more than eight years. The Bill allows losses to be carried forward indefinitely.

♤ In the Act, Indian companies are treated as residents. Non-Indian companies are resident if control or management is wholly in India. According to the Bill any non-Indian company is treated as resident if its place of effective management is in India.

The Bill removes a number of deductions and exemptions which could lead to a rise in revenue. At the same time income tax slabs have been widened, which could lead to a decrease in tax collections. There is no information available in the public domain which shows the net impact on revenue of these proposals. Therefore, it is not possible to estimate whether there will be an increase or decrease in the government’s revenue collection under the Bill.