New Delhi [India], Feb.1 : Presenting the General Budget for 2017-18 in parliament today, Union Minister for Finance and Corporate Affairs Arun Jaitley said income tax for smaller companies with annual turnover of up to Rs.
50 crore would be reduced to 25 percent in order to make MSME companies more viable and also to encourage firms to migrate to the company format.
"As per data of Assessment Year 2015-16, there are 6.94 lakh companies filing returns of which 6.67 lakh companies fall in this category, and, therefore, percentage-wise 96 percent of companies will get this benefit of lower taxation.
This will make our MSME sector more competitive as compared to large companies. The revenue forgone estimate for this measure is expected to be Rs. 7,200 crore per annum," Jaitley said while presenting his fourth budget. He further said, "It is not practical to remove or reduce MAT (Minimum Alternate Tax) at present. However, in order to allow companies to use MAT credit in future years, a proposal to allow carry forward of MAT up to a period of 15 years instead of 10 years at present." Minimum Alternate Tax is at present levied as an advance tax.
Although the plan for phasing-out of exemptions will kick in from 1.4.2017, the full benefit of revenue out of phase-out will be available to the government only after seven to ten years when all those who are already availing exemptions at present complete their period of availment.
The government also announced several measures for stimulating growth in the budget proposals for 2017-18.
A concessional with-holding rate of five percent is being charged on interest earned by foreign entities in external commercial borrowings or in bonds and government securities.
This concession is available till 30.6.2017. The Finance Minister proposed to extend it to 30.6.2020. This benefit is also extended to Rupee Denominated (Masala) Bonds. The government gave income tax exemptions to start-ups with certain conditions last year. For the purpose of carry forward of losses in respect of such Start-Ups, the condition of continuous holding of 51 percent of voting rights has been relaxed subject to the condition that the holding of the original promoter/promoters continues.
Also the profit linked deduction available to the start-ups for three out of five years is being changed to three out of seven years.
In order to give a boost to banking sector, Jaitely proposed to increase allowable provision for Non-Performing Asset from 7.5 percent to 8.5 percent.
This will reduce the tax liability of banks. He also proposed to tax interest receivable on actual receipt instead of accrual basis in respect of NPA accounts of all nonscheduled cooperative banks also at par with scheduled banks.
This will remove hardship of having to pay tax even when interest income is not realised. Considering the wide range of use of LNG as fuel as well as feed stock for petro-chemicals sector, Jaitley proposed to reduce the basic customs duty on LNG from five to 2.5 percent.
In order to incentivise domestic value addition and to promote Make in India, he proposed to make changes in customs and central excise duties in respect of certain items in his speech.
Some of these proposals are also for addressing duty inversion..
Source: ANI
