Budget Expectations 2025: Corporate Tax Concession Scheme May Return at 18%
By: Admin
Date: January 24, 2025
Categories: Tax News
Reading Time: 4 Min
Corporate Tax Concession Scheme Likely to Return
The upcoming Union Budget for 2025-26 may reintroduce a corporate tax concession scheme aimed at promoting domestic manufacturing, sources told Zee Business. This potential move reflects the government’s ongoing efforts to boost the manufacturing sector and attract substantial investments.
Proposed Concession at an 18% Rate
The central government is reportedly considering a tax concession scheme for companies establishing new production units. Notably, from October 2019 to March 2024, the government had offered a 15% concessional tax rate under a similar scheme.
However, the new scheme may introduce a slightly higher concessional tax rate of 18%, which is 300 basis points higher than the previous rate. This adjustment could, nonetheless, strike a balance between incentivizing manufacturers and maintaining fiscal discipline.
Context: Modi 3.0 Government’s Priorities
As this marks the first full-year Budget under the Modi 3.0 government following the 2024 general elections, there is heightened focus on bolstering the domestic manufacturing sector. Over recent years, the government has consistently prioritized measures to strengthen micro, small, and medium enterprises (MSMEs) and promote labour-intensive industries.
MSME-Focused Measures in the July Budget
The July 2024 Budget introduced several initiatives designed to empower MSMEs. Key highlights include:
- Credit Guarantee Scheme
- Facilitated term loans for MSMEs to finance machinery and equipment without requiring collateral or third-party guarantees.
- Self-Financing Guarantee Fund
- Offered guarantee cover up to ₹100 crore for eligible applicants.
- Mudra Loan Expansion
- Doubled the limit for Mudra loans under the “Tarun” category from ₹10 lakh to ₹20 lakh, particularly benefiting entrepreneurs with a proven repayment history.
Sustained Focus on Domestic Manufacturing
To further enhance domestic manufacturing, the government has implemented various policies, including:
- Employment-linked incentives to benefit employers and employees alike.
- Comprehensive packages for MSMEs that encompass financial assistance, regulatory reforms, and technology adoption.
Conclusion: Anticipated Impact of the Concession Scheme
If reintroduced, the 18% corporate tax concession scheme could significantly boost India’s manufacturing sector. By incentivizing new production units, the policy aims to:
- Encourage domestic and foreign investments.
- Create employment opportunities.
- Strengthen India’s position as a global manufacturing hub.
With the Union Budget scheduled for February 1, all eyes are on Finance Minister Nirmala Sitharaman’s announcements. These measures will likely play a crucial role in shaping India’s economic and industrial trajectory for the next financial year.
