Tax incentives for manufacturing units in rural Bihar

NEW DELHI: A day after Prime Minister Narendra Modi announced a Rs 1.25 lakh crore package for Bihar, the finance ministry has notified tax incentives for manufacturing in the backward areas of the state.

The Finance Act 2015 has provided incentives for manufacturing facilities set up during the five-year period beginning April 1, 2015 in the backward areas of some specified states. The incentive is in the form of higher additional depreciation and investment allowance on the cost of plant and machinery acquired and installed. Around 21 of Bihar’s 38 districts, including capital Patna, have been notified as backward areas.

“This will give a major boost to industrialisation and creation of new jobs for the people of Bihar. In effect, Bihar now falls under a special category for income tax purposes,” the finance ministry said in a release.

The notification is based on a list of backward areas received from the Bihar government on August 14, the release said. The incentive is part of the Bihar Package announced by the Prime Minister.

A manufacturing facility set up in these areas will be eligible for 35% additional depreciation against 20% earlier and compared with normal depreciation of 15%, helping lower the initial tax incidence. Such investment will also be eligible for 30% investment allowance instead of 15% if the investment exceeds Rs 25 crore