The Finance Ministry has announced a slash in corporate tax rates for companies that do not avail of any tax incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%. The corporate tax rate for new companies is 15%. The tax relief has been announced in the wake of slow down in the country.Finance Minister Nirmala Sitharaman said that an Ordinance has been cleared...
The Finance Ministry has announced a slash in corporate tax rates for companies that do not avail of any tax incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%. The corporate tax rate for new companies is 15%. The tax relief has been announced in the wake of slow down in the country.
Finance Minister Nirmala Sitharaman said that an Ordinance has been cleared giving effect to the amendments to the Income Tax Act, 1961. According to the Finance Minister, revenue foregone for the reduction in corporate tax rate and other relief measures are likely to cost the government Rs. 1.45 lakh crore annually.
The tax rate cuts may encourage businesses to invest more at a time when economic growth rate has slowed down to a six-year low of 5% in the June quarter.
In order to attract fresh investment in manufacturing activities and to give a boost to the ‘Make in India’ drive, another provision has been included in the Income Tax Act to tax any new domestic company incorporated on or after 1 October 2019 and making fresh investments in manufacturing an option to pay a tax of 15%. Such benefit is available to companies that do not avail of any tax incentives and commence production on or before 31 March 2023. The effective tax rate for new companies will be 17.01% inclusive of all surcharge and cess.
She added that listed companies which had announced share buybacks before 5 July, the day the Union Budget brought share buybacks under the tax net, will be exempt from buyback tax. Companies that do not avail of the concessional tax regime will continue to pay tax at the pre-amended regime. They can opt for the concessional tax regime after the end of the tax holidays or the exemption period that they currently avail.
In a nut-shell :
- New provision inserted in the income tax act with effect from fiscal year 2019-20, that allows any domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions.
- Manufacturing companies set up after October 1 to get option to pay 15% tax. Effective tax rate for new manufacturing firms to be 17.01% inclusive of surcharge & tax.
- Listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged.
- Higher surcharge will also not apply on capital gains on sale of security including derivatives held by FPIs.
- Enhanced surcharge will not apply to capital gains arising on equity sale or equity-oriented funds liable to STT stabilise flow of funds into capital markets.
- To provide relief to companies availing of concessions and benefits, a MAT relief by reducing it from 18% to 15%.
- CSR 2% spending to include government, PSU incubators and public funded education entities, IITs