This conclusion is drawn from a Business Standard Research Bureau study based on the tax actually paid by 728 manufacturing companies and 25 foreign companies in the BS 1000 list of companies, and by 35 listed banks, in 2003-2004, as well as the tax payable based on published net profits, had these exemptions not been available.

The study shows that the corporate sector made tax provisions of Rs 30,372 crore (Rs 303.72 billion) in 2003-2004 on pre-tax profits of Rs 1,23,665 crore (Rs 1236.65 billion). But their tax liability, according to the applicable rate of corporate tax, came to Rs 44,715 crore (Rs 447.15 billion). This means that these corporates availed of Rs 14,343 crore (Rs 143.43 billion) in tax concessions.

Indian companies are taxed at the rate of 35 per cent, with a 2.50 per cent surcharge. Foreign companies are taxed at a 40 per cent rate, with a 2.50 per cent surcharge. But because of tax exemptions, Indian companies paid Income-Tax at an effective rate of 23.54 per cent, banks at a tax rate of 27.74 per cent and foreign companies at 26.98 per cent.

The 728 manufacturing companies in this sample made a tax provision of Rs 21,742 crore (Rs 217.42 billion) on a consolidated pre-tax profit of Rs 92,369 crore (Rs 923.69 billion). But these companies were liable to pay Rs 33,138 crore (Rs 331.38 billion) in taxes.

The tax savings, thus, work out to Rs 11,395 crore (Rs 113.95 billion). The 25 foreign companies in this sample made a provision of Rs 1,842 crore (Rs 18.42 billiona) against a tax liability of Rs 2,799 crore (Rs 27.99 billion), saving Rs 957 crore (Rs 9.57 billion) in taxes. The remaining companies in the BS 1000 list made losses, and so, paid no tax.

Thirty-five banks paid Rs 6,827 crore (Rs 68.27 billion) in tax in 2003-2004, against an effective tax liability of Rs 8,778 crore (Rs 87.78 billion). Thus, banks availed of tax concessions of Rs 1,991 crore (Rs 19.91 billion).

The shipping industry pays the lowest effective tax rate. In 2003-2004, the seven shipping companies paid tax at the rate of 4.19 per cent against an effective rate of 37.50 per cent, thereby saving Rs 460 crore (Rs 4.6 billion).

The diversified sector (comprising companies with interests in diverse industries like cement, textiles, petrochemicals and refineries) paid an effective tax rate of 11.33 per cent, against the card rate of 37.13 per cent, thereby saving Rs 1,902 crore (Rs 19.02 billion).

Among others, software firms paid tax at the rate of 13.25 per cent, the textiles industry at 9.90 per cent, the paper and paper products industry at 11.32 per cent, the cement industry at 12.80 per cent, the automobiles industry at 17.4 per cent, the pharmaceuticals industry at 18 per cent and personal care companies at 20.6 per cent.

Reliance Industries, which straddles the refinery and textile sectors, saved as much as Rs 1,626 crore (Rs 16.26 billion), paying an effective rate of 6.80 per cent of profit before tax.

Indian companies can avail of a plethora of tax concessions. Section 80 IB provides for a 100 per cent tax holiday for the first five years, and 30 per cent rebate for the next five years, for setting up cold chain facilities for agricultural produce.

Section 80 IA, too, provides for a 100 per cent tax holiday for five years, and 30 per cent for the next five years, for providing telecommunication services.

Section 10A allows for a 100 per cent tax holiday for 10 years on the export profits of an undertaking set up in a free trade zone, a software technology park, electronic hardware technology park or a special economic zone.

Similarly, Section 10B provides for a 100 per cent tax holiday for 10 years for 100 per cent export-oriented units engaged in the manufacture or production of computer software. Then, undertakings in Himachal Pradesh, Sikkim, Uttaranchal and the north-eastern states, are eligible for a 100 per cent tax holiday for 10 years.