iNDICA NEWS BUREAU-
India’s apex business chamber, Confederation of Indian Industry (CII), has urged the government to keep the corporate tax rates at current levels to provide tax certainty for businesses, ahead of the Union Budget 2024-2025.
“Industry deeply appreciates the government’s move to maintain stability in tax rates despite the tumultuous economic and political developments in the last three years,” the country’s apex industry chamber has stated in its proposals submitted to the Finance Ministry.
CII has in its proposals recommended the rationalization of Angel Tax by removing Section 56(2)(viib) in order to further nurture innovation and start-ups. According to the industry chamber, the scrapping of this section would “greatly aid in capital formation” for the start-up sector.
Under section 56(2)(viib) of the Income Tax Act, for a start-up to become eligible for angel tax exemption, it must meet certain conditions which industry claims are cumbersome and come in the way of attracting more investments.
As far as indirect taxation is concerned, CII has in its proposals sought the removal of the restriction to avail ITC (input tax credit) “to ensure seamless flow of credit to businesses where the property being constructed is being used for further providing an output service (such as renting, etc)”.
The concept of ITC, allowing developers to claim credit for taxes paid on inputs used in construction, further impacts the final cost. While developers cannot claim ITC on under-construction properties, they can on completed commercial spaces, potentially reducing the overall tax burden.
CII has also sought the rationalization of the capital gains tax rate structure.
“Multiple policy considerations have resulted in a complex structure of capital gains taxation. At present, there is no consistency in tax rates or holding period for different types of instruments falling within the same asset class. Even the indexation benefit differs in different situations. The tax rates also differ for residents and non-residents,” according to the CII presentation.
CII has made recommendations “to bring about simplicity, consistency and rationalization of the capital gains tax regime”.
The apex industry chamber has suggested that in the case of financial assets, the long term capital gains tax of 10 percent and short term capital gains tax of 15 percent should be levied. It has recommended a holding period for turning long term in the case of financial assets at 12 months, while in the case of immovable assets, such as residential property, can be fixed at 36 months.
