The government on Monday lowered the corporate tax for new manufacturing units to 25 per cent to promote industrial activity and generate jobs.

With regard to small units having a turnover of Rs 5 crore (Rs 50 million), the corporate tax rate has been reduced from 30 per cent to 29 per cent, Finance Minister Arun Jaitley said in the Budget 2016-17 tabled in the Lok Sabha.

This is a part of the exercise to bring down corporate tax rate in a phased manner from the existing 30 per cent to 25 per cent over a period of four years beginning next fiscal.

"In the first phase, I propose following two changes in the corporate tax rate," he said.

"The new manufacturing companies which are incorporated on or after March 1, 2016 as proposed to be given an option of being taxed at 25 per cent plus surcharge plus cess provided they don't claim any profit link, investment link deduction and don't claim any investment allowance at accelerated depreciation," he said.

This will help incentivise setting up of new manufacturing units and generate employment.

"I also propose to lower the corporate income tax rate for next financial year for relatively small enterprise companies with a turnover not exceeding 5 crore (50 million) to 29 per cent plus surcharge plus cess," he said.

• Union Budget 2016: Complete Coverage