Companies setting up semiconductor wafer fabrication manufacturing will now be able to get tax deductions linked to their investments. Last year, an incentive in the form of investment allowance to a manufacturing company that invests more than ₹100 crore in plant and machinery during the period April 1, 2013 to March 31,2015 was announced.

Considering the need to incentivise smaller entrepreneurs, the Finance Ministry has proposed to provide investment allowance at the rate of 15 per cent to a manufacturing company that invests more than ₹25 crore in any year in new plant and machinery. This benefit will be available for three years, i.e., for investments up to March 31, 2017. The scheme announced last year will continue to operate in parallel till March 31, 2015. The investment-linked deduction has been extended to semi-conductor wafer fabrication manufacturing units as well in a bid to boost investments.

“Fab manufacturing is one of the most capital expenditure intensive programmes and announcements for continuation in subsidies for such heavy investments, and giving some more time to investors is a good step,” Ashok Chandak, Chairman, India Electronics and Semiconductor Association (IESA), told Business Line .

He said capital expenditure was low earlier as many companies were not getting benefits in terms of taxes, but now many new companies can think of manufacturing semiconductor chips in India as the Government is bringing down the tax burden for such companies.

The Government has announced several other incentive packages to promote fab manufacturing.

“India needs to build intellectual capital in the long term and this budget perhaps is a good start. It is a positive and much-needed boost to the electronics manufacturing and R&D sector,” Kaustubh Nande, Country Marketing Head, Ansys India, said. According to sources in the Ministry of Information and Technology, the details of the policy would be revealed on Friday.

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