The Finance Ministry will look to provide only investment-oriented tax breaks in the direct taxes code (DTC) rather than profit-linked ones, Parthasarathi Shome, Advisor to the Finance Minister, has said.
The effort will be to give tax breaks for investments and not provide tax incentives from the profits side, Shome said at an Assocham industry interaction here.
This tax policy stance may come as a disappointment to the exporting community, which is looking for the return of profit-linked tax incentives to encourage exports.
India Inc on Thursday pointed out that the recent Budget did not give any tax incentives, such as export profit deduction.
Ruling out tax exemption on export profits even in the direct taxes code, Shome said the Finance Ministry was now analysing the recommendations of the Standing Committee on Finance on the Direct Taxes Code Bill.
“We are studying carefully the recommendations of the Standing Committee. Work is going on in this regard.”
Shome also pointed out that the investment allowance proposal in the Budget was intended to encourage investments in plant and machinery.
“We want to focus on the economic outcome and make the tax policy more investment oriented,” he said.
Once enacted, the direct taxes code will replace the existing income tax law. “It will be a fundamental churning of income tax law.”
There are indications that the Government will take steps in the second leg of the Budget session (April 22-May 22) to bring in amendments to the direct taxes code Bill.
STRUCTURAL REFORMS
Shome said the Finance Ministry would continue to undertake structural reforms in tax administration in the coming days.
The Ministry is now reviewing the performance of large taxpayer units (LTUs) – a concept introduced in 2006. In the coming days, transfer pricing and advance pricing agreements may also be brought within the purview of LTUs, Shome indicated.
srivats.kr@thehindu.co.in