Tax Reforms In the Pipeline - International Law Office

Income and corporate tax concessions are likely to be rationalized in next year's budget. The Ministry of Finance has set up four committees to study income tax concessions and determine whether the concessions' objectives were achieved.

Meanwhile, the Department of Chemicals and Pharmaceuticals has asked the Finance Ministry to exempt income derived from intellectual property rights based on research undertaken in India from both corporate tax and minimum alternate tax. Acceptance of this proposal would mean that income from the sale or license of new chemical entities or new drug delivery systems developed by Indian companies would be totally tax-free. The department also plans to put in place a package of fiscal incentives including:

• a 10-year tax holiday for companies registered for carrying out scientific and industrial research and development;
  
  
• a duty exemption for all approved research and development units' imports of chemicals, bio-chemicals, special
  consumables, equipment and spares parts;
  
  
• a one-year tax deduction for all research and development expenditure on consumables and equipment.

Finally, the government proposes to revamp the tax structure for shipping companies in a bid to increase domestic shipping tonnage. The move is expected to be revenue neutral. Under the proposed taxation structure, the corporation tax on shipping companies is to be replaced with a tax on net registered tonnage.

For further information on this topic please contact Rajesh Begur at ARA Law by telephone (+91 22 263 1700) or by fax (+91 22 263 1800) or by e-mail (aralaw@giasbm01.vsnl.net.in).
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