Budget expectations of income tax provisions for the manufacturing sector
As the Union Budget 2024-25 is interim, it is improbable that numerous changes or reforms will be introduced. However, India is at a critical juncture and hopes to attract investment in the manufacturing sector, including electronic vehicles, hydrogen fuel, heavy industry, etc. The government is expected to concentrate on the ‘Make in India’ and the Atmanirbhar Bharat initiative, as these significant initiatives were launched to position India as an appealing investment destination. Anticipate some adjustments in the pertinent tax provisions to enhance investments in manufacturing further.
Lower tax rate for manufacturing industries – Section 115BAB of the Income-tax Act 1961 (ITA)
Under Section 115BAB of the ITA, a newly established company in the manufacturing sector may choose a reduced tax rate of 15% upon meeting specific conditions. This section marked a positive development by aligning India’s tax rate with, in some cases, even lowering it compared to tax rates in several Asian countries. This rate cut has attracted quite a few manufacturing investments in India.
However, the benefit of this lower tax rate is available only if the company commences manufacturing by 31 March 2024. Thus, the sunset clause is only a couple of months away.
Extend the sunset clause by a minimum of one year to sustain the current optimistic sentiment and encourage a continued increase in manufacturing sector investment.
