NEW DELHI: India has unveiled the details of an ambitious reform plan to rid its income tax law of exemptions and lower the corporate tax rate to 25% from 30% now, bringing it closer to international levels.Tax holidays for special economic zones and units in such areas, infrastructure facilities, and commercial production of natural gas and mineral oil having no end date for commencement of operations, will sunset on March 31, 2017, as per the plan. Weighted deduction from taxable income for specified sectors including affordable housing, cold chains, warehousing and gas pipelines will also be off from April 1, 2017. The highest rate of depreciation is proposed to be cut to 60% from 100%.Though corporate tax is 30% at present, the effective rate is much lower at 23% because of incentives.In 2014-15, the government is estimated to have foregone Rs 62,400 crore in corporate taxes on account of various incentives, up from Rs 57,800 crore a year earlier. “This is a step towards simplification of tax laws, which is expected to bring about transparency and clarity,” the Central Board of Direct Taxes, the apex direct taxes body, said on Friday.The plan, as promised by Finance Minister Arun Jaitley in his budget speech, aims to declutter the income tax law that has been laden with tax exemptions leading to a rise in abuse and tax disputes. The minister had also assured to reduce the corporate tax rate to 25% from 30% over the next four years.In his February budget speech, Jaitley had said: “A regime of exemptions has led to pressure groups, litigation and loss of revenue. It also gives room for avoidable discretion.”The proposal, which has been put up seeking public comment, hinges on three tenets. Profit-linked, investment-linked and area-based deductions will be phased out for both corporate and non-corporate tax payers. Provisions having a sunset date will not be modified to advance the sunset date and, in the case of tax incentives with no terminal date, a sunset date of March 31, 2017 will be provided either for commencement of the activity or for the claim of benefit depending upon the structure of the relevant provisions of the Act.All forms of weighted deduction will be eliminated, with effect from April 1, 2017. “This plan has been designed to prevent any abrupt loss to any business,” a finance ministry official told ET.Tax experts welcomed the move saying it would bring down the corporate tax rate. “As promised, it clearly lays down that the base tax rate for companies would be reduced from 30% to 25%. This will immediately bring down the effective tax cost for companies and is bound to increase investment activity in the country,” said Neeru Ahuja, partner at Deloitte Haskins & Sells LLP.Exemption schemes for special economic zones and units run in perpetuity, and there is no deadline in the law for investments to come in, and so a sunset date is being proposed. Tax exemptions already having a sunset date will not be renewed.Besides SEZs, commercial production of natural gas in blocks licensed under CBM IV and NELP VIII, and mineral oil from blocks licensed up to March 31, 2011 will also sunset on March 31, 2017. Deduction for expenditure on scientific research is proposed to be curtailed to 100% from 2017-18 from 200% at present. Accelerated depreciation, an incentive given to companies to encourage them to invest more, alone added up to a tax loss of Rs 37,000 crore. Benefits to units exporting from SEZs added up to another Rs 18,400 crore.“Apparently, the proposal seems quite fair, especially where it states that the tax exemption provisions having a sunset date will not be modified to advance sunset dates,” said Sanjay Sanghvi, partner at law firm Khaitan & Co.Ketan Dalal, senior tax partner PwC India, said the issue of sunset deadline needed more clarity, “in the sense that where the relevant activity or project commences on or before March 31, 2017, the incomes beyond that from such activity or project should continue to be exempt for the period envisaged in the exemption, since commercial decisions have been initiated on that basis”.