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The finance ministry is weighing an industry proposal for reintroduction of investment allowance and allowing higher depreciation to boost industrial growth by way of tax breaks.
The push to the industrial growth, which showed early signs of recovery posting positive numbers of 1.4 per cent in April, would hinge both on consumption and investment-led economic expansion, an official in the finance ministry said.
Restoring economic growth has been listed among the top priorities of the new United Progressive Alliance government. "It will be only through the growth that the larger objective of employment generation can be realised. . . But to achieve growth, we need investment friendly policies," the official said.
Industry bodies like Ficci, CII and Assocham have made a strong demand for reintroduction of investment allowance in the coming Budget.
If such an allowance is allowed, deduction of a particular percentage of the amount spent on new plant and machinery would be deductible while computing taxable business profits.
The government had allowed such an allowance of 20 per cent till April 1990.