New Delhi: The government seems to be in no mood to extend the sunset clauses of numerous tax holidays it extends to various sectors.
According to sources, at a recent meeting of officials, the revenue department has told the Department for Promotion of Industry and Internal Trade Investment (DPIIT) in no uncertain terms that tax holiday extended to start-ups would not be given any extension.
Under the tax holiday scheme extended to various sectors to help it stabilise operations, the government extends five-year tax exemption on profit and gains made by the sector. For start-ups, under Section 80 I A of income tax act, full deduction of tax on profit and gain is provided to entire set up between April 1, 2016 and March 31, 2021.
With the tax exemption regime coming to an end in four months time and Covid-19 pandemic impacting operations of entities, a proposal was given to extend this tax holiday for another five years till 2026.
Sources said that income tax rejected this proposal for extension of tax holiday as the general policy is to phase out exemptions while reducing the overall tax rate on corporates. Last year the government had reduced corporate tax rates to 15 per cent for new entities and 22 for others. With this, tax rates in India had already come to one of the lowest levels globally negating any need to extend exemption regime.