Phasing out deductions
The deductions given in the table below are proposed to be lowered or phased out over the next few years. The finance bill has proposed to reduce the corporate rate of tax to 25% for newly incorporated entities which are not going to claim any of the above said deductions. It is proposed to bring down the corporate rate to 25% for all corporate assesses over a period of 4 years.
Reduction in weighted deduction of expenditure:
-
Section
Weighted Deduction presently available (percentage of actual expenditure)
Proposed deduction (actual or percentage of actual expenditure)
35CCD – Expenditure on skill development project
150%
Actual expenditure from A.Y. 2021-22 onwards
35(1)(ii) – Expenditure on scientific research
175%
150% effective from A.Y. 2018-19 to A.Y. 2020-21
Actual expenditure from A.Y. 2021-22 onwards
35(1)(iia) – Expenditure on scientific research
125%
Actual expenditure from A.Y. 2018-19
35(1)(iii) – Expenditure on scientific research
125%
Actual from A.Y. 2018-19 onwards
35(2AA) – Expenditure on scientific research
200%
150% effective from A.Y. 2018-19 to A.Y. 2020-21
Actual expenditure from A.Y. 2021-22 onwards
35(2AB) – Expenditure on scientific research
200%
150% effective from A.Y. 2018-19 to A.Y. 2020-21
Actual expenditure from A.Y. 2021-22 onwards
35AD – Deduction in respect of specified
150%
Actual expenditure from A.Y. 2018-19 onwards
35CCC - Expenditure on notified agricultural extension projects
150%
Actual expenditure from A.Y. 2020-21 onwards
Complete Withdrawal of tax exemption:
-
Section
Deduction available presently
Proposed phase out
10AA – Special provision in respect of newly established units Special economic zones (SEZ)
Profit linked deduction for units in SEZ for profits derived from export of articles/things/services
No deduction to units commencing manufacture/production of article or thing or start of service from A.Y. 2021-22 onwards
32 read with Rule 5 – Accelerated Depreciation
100% depreciation for certain block of assets was available to certain industrial sectors
Rate of depreciation restricted to 40% effective from A.Y. 2018-19 onwards. New rate applicable from to all assets (old and new)
S. 80-IA – Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development etc.
100% profit is deductible
No deduction if specified activity commences on or after 01.04.17
S. 80-IAB - Deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone
100% profit is deductible
No deduction if specified activity commences on or after 01.04.17
S. 80-IB – Deduction in respect of profits and gains from certain industrial undertaking other than infrastructure development undertakings
100% profit is deductible
No deduction if specified activity commences on or after 01.04.17