The center has come up with real Diwali Bonanza for domestic companies way before the Diwali fever grips the nation. Its decision to reduce effective corporate tax to 25.17% which will also include all cess and surcharges for domestic companies has received a warm welcome from the industry. Finance Minister Nirmala Sitharaman, while making the announcement revealed that the new tax rate will be effective from the current fiscal which began from April 1st.
Sitharaman also said that the revenue foregone on reduction in corporate tax and other relief measures will be in tune of Rs. 1.45 lakh crore annually.
This move on the government’s part has put India’s tax rate on par with its Asian peers and will strengthen the efforts to attract investments as the companies look for other destinations to sidestep supply chain disruptions that have emerged from the US-China trade conflict. Domestic manufacturing companies that came into existence after 1st of October can pay income tax at a rate of 15% without any incentives. What this means is that the effective tax rate for the new manufacturing setups will be 17.01% which will also include cess and surcharge. The finance minister further stated that the companies can opt for lower tax rate after the expiry of tax holidays and concessions that they might be availing at the present moment.
The government has also decided not to charge enhanced surcharge introduced in the budget on the capital gain that may arise from the sale of equity shares in a company that is liable for a securities transaction tax. Moreover, the super-rich tax will not be applied on the capital gains that arise from the sale of any security that includes derivatives in the hands of the foreign portfolio investors.
Furthermore, the finance minister also said that the listed companies that have declared the buyback of shares before 5th of July will not be charged with the super-rich tax. The companies now also have the freedom to utilize their 2% CSR spend on incubation, IITs, NITs and national laboratories. The finance minister appeared confidant when she said that the tax concessions will bring investments in Make in India and strengthen employment and economic activity that would lead to generating more revenue.
