Indian government considering a 10-year tax holiday for new business

The Indian government is planning to give a tax holiday for new investments by companies. Various measures are under consideration to revive an economy hit by the COVID-19 pandemic. There is a proposal to give a four-year tax holiday to companies investing in labour-intensive sectors.

The Ministry of Commerce and Industry is reportedly proposing for a 10-year tax holiday for companies making investments of USD500 million and above. The proposal, whose details are still under work, may allow tax holiday to companies beginning operations within three years from 1 June 2020. The sectors under consideration include electronics, medical devices, telecom equipment and capital goods. The Finance Ministry is said to be evaluating the proposal.

The proposal also seeks a four-year tax holiday for companies investing USD100 million and above in labour-intensive sectors such as footwear, textiles, leather and food processing. For these sectors, a 10% tax rate is under consideration for the next six years after expiry of the tax holiday. The Ministry identifies top 50 clusters for upgrades in infrastructure, testing and research and development facilities.

Also Read: IT department speeding up the processing of pending income tax refunds

The Indian government is looking to tap opportunities arising from the exit of companies from China. The Indian government is planning major reforms in land, liquidity, labour and laws. Proposals are underway to provide easy access to land for industrial use. Few Indian States such as Madhya Pradesh, Uttar Pradesh and Gujarat made announcements for land and labour law reforms. 

Our country is heading towards a first in four decades, full-year contraction in economic activities. Challenges lie in terms of job losses and dull consumer demand. Hence, the government is considering to offer tax breaks for new investments to boost the economy. 

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