Finance Minister Nirmala Sitharaman has announced a big reduction in income tax rate for corporates. Government of India has slashed basic corporate tax rate to 22% from 30% while for new manufacturing companies it has been cut down to 15% from 25%. The Central Government has been declaring series of measures to boost growth that had fallen to six-year low of 5% in June quarter. She said that the tax relief is part of steps, the government has been declaring after consultations with the industry, on a weekly basis to deal with the slowdown.
Government Cuts Corporate Tax Rate to 22%
The Minister has said, revenue foregone for the reduction in corporate tax rate & other relief measures announced today will cost the government ₹1.45 lakh crore per year.
The government cut corporate tax rate for companies that do not avail of any tax incentive to 22%. Effective corporate tax rate after surcharge will be 25.17%.
Corporate Tax Slashed for Domestic Companies, Here are some announcements from Government:-
A set of amendments are being brought about in taxation laws through an Ordinance
Government has declared to slash corporate tax rate for domestic companies. A domestic company can pay income tax at 22% if they don’t seek any exemption or incentives. New tax rate will be applicable from the current fiscal which started on 1st April.
Corporate Tax Rate Cut From 30% To 25.17% inclusive of all surcharges and cess for such domestic companies. These companies also not required to pay minimum alternative Tax.
Companies availing exemptions can opt to pay tax of 22% after the exemption period is over.
Enhanced surcharge announced in Budget shall not apply on capital gains arising on sale of any securities including derivatives in the hands of foreign portfolio investors.
The effective tax rate for new companies will be 17.01% inclusive of all surcharge and cess.
Companies can apply for lower tax rate after expiry of tax holidays & concessions that they are availing now.
New manufacturing companies will have to pay lower corporate tax rate of 15%
At present, business income is taxed at 30%, exclusive of cess and surcharge, other than the companies with sales of up to ₹400 crore.
The minister said, 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%, the minister said. “This benefit is available to companies that do not avail of any tax incentives and commence production on or before 31 March 2023” said Sitharaman.