Union Budget 2024: Extension of concessional corporate tax for new manufacturing units sought. Check details

Tax consultancy firm PWC in its wishlist ahead of the Union Budget 2024 has the NDA government to extend the concessional corporate tax rate of 15%, which got over in March 2024 with the end of FY24. Section 115BAB of the Income Tax Act offers a concessional tax rate of 15 per cent for new domestic manufacturing companies. 

In 2019, the government implemented a concessional corporate tax rate of 15% specifically for newly-established domestic manufacturing companies. This advantageous rate applied to domestic manufacturing firms that were registered on or after October 1, 2019, and initiated manufacturing or production activities by March 31, 2023. The Finance Act of 2022 further prolonged this sunset date until March 31, 2024, providing an extended window for eligible companies to benefit from this reduced tax rate.

It was reported earlier that the NDA government may introduce a new scheme of concessional corporate tax rates for new manufacturing units in the upcoming Budget in order to support the private capital expenditure cycle. This new scheme is anticipated to be akin to the previous one which provided a concessional tax rate of 15%, compared to 22% for other entities. The earlier scheme had concluded on March 31, 2024. FM Nirmala Sitharaman will be presenting the Union Budget for 2024-25 next week on July 23.

In its PwC said: “A further extension of the sunset date will enable India to remain attractive for making a fresh capital investment, provide a boost to the domestic economy and also encourage exports.”  

Earlier, Deloitte India had also asked the Centre to extend by two years the window for concessional corporate tax rate for new manufacturing companies.

Rohinton Sidhwa, Partner, Deloitte India, highlighted that the 15 per cent concessional tax rate has been crucial in attracting investments in India. It has yielded remarkable results, significantly boosting foreign direct investments in the Indian manufacturing sector, he said. He noted that there was substantial increase in FDI from Rs 89,766 crore in FY 2020-21 to Rs 1,58,332 crore in FY 2021-22, reflecting a 76 per cent jump. 

PwC has also made a case for the introduction of a comprehensive tax amnesty scheme under Customs to clear past litigations on the lines similar to the Sabka Vishwas Legacy Dispute Resolution Scheme, 2019, for pre-GST era indirect taxes and Vivad Se Vishwas scheme for Income tax.