New Delhi | Finance Minister Nirmala Sitharaman announced on Friday announced that Corporate tax rates for domestic companies and new manufacturing companies have been slashed.
“Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue,” said Finance Minister Nirmala Sitharaman.
The change gives a domestic company an option to pay income tax at 22 per cent (down from 30 per cent) while new domestic manufacturing companies can pay corporate tax at 15 per cent (instead of existing 25 per cent) provided they do not claim any exemption. This means that the effective tax rate would 25.17 per cent and 17.01 per cent, respectively.
“This is a major tax reduction that has happened,” she said.
This set of amendments was brought about in the taxation laws through an ordinance which was passed a couple of minutes ago, Sitharaman said at a media conference before heading into the Goods and Services Tax Council meeting.
She said the points were part of a continuing effort to respond during government consultations.
“Now, India’s corporate tax rates are almost at par with many Asian and South-East Asian countries and lower than many countries,” she said listing seven changes in the tax regime.
Sitharaman further said the Minimum Alternate Tax (MAT) rate has been reduced to 15 per cent from the existing 18.5 per cent for those companies which continue to avail incentive or exemptions.
The total revenue foregone for a reduction in corporate tax rate is estimated at Rs 1.45 lakh crore per year.
In order to stabilise the flow of funds in the capital market, the government also said that 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.(FPI)
Meanwhile, Sensex jumped over 1600 points after Sitharaman’s rate cut announcement.