Companies engaged in infrastructure sector and enjoying tax holiday for 10-20 years in a row under Section 80-IA may soon end up losing such profit-based incentives as finance ministry plans to replace them investment-based incentives, said a media report.
The government had, in the previous fiscal, lost around Rs 15,000 crore in revenues due to various profit-linked incentives provided to infrastructure companies under section 80-IA. This amount also translated into 19 per cent of the total of Rs 79,173 crore that could not come to the government's pocket due to various profit-linked incentives given to India Inc.
FinMin officials also said that companies were misusing profit-linked incentives to make undue gains. Assessing officers felt that companies sometimes earn more than ordinary gains by selling to related parties at a higher price than that charged from unrelated parties and by diverting profits from the taxed segment to the exempt segment.
The move comes at a time when government has been trying to rein in its fiscal deficit and boost investments in the economy.