In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.
Making the announcement, Finance Minister Nirmala Sitharaman said that the changes in the Income Tax Act and Finance Act will be made effective through an ordinance. This is being done to promote investment and growth. In effect, the corporate tax rate will be 22 % for domestic companies, if they do not avail any incentive or concession. The minister also said companies opting for 22 % income tax slab would not have to pay minimum alternative tax.
Sitharaman further said, new domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 % without any incentives. Meaning, effective tax rate for new manufacturing companies will be 17.01 % inclusive of all surcharge and cess.
The government has also decided to not levy enhanced surcharge introduced in Budget on capital gain arising from sale of equity shares in a company liable for securities transaction tax. Also, the super-rich tax will not to apply on capital gains arising from sale of any security including derivatives in hands of foreign portfolio investors.
In another relief, the listed companies which have announced buyback of shares prior to July 5, will not be charged with super rich tax. The Finance Minister while talking about the amendments introduced in the Income Tax Act said, with these amendments, tax rate in India will be one of the lowest and will become at par with most of the economically developing Asian and south-east Asian countries.
Sitharaman expressed confidence that the tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue.
Prime Minister Narendra Modi has termed as historic the cut in corporate tax rates and asserted that economic announcements made in the last few weeks show that his government is leaving no stone unturned to make India a better place to do business.
In a Tweet the PM said “The step to cut corporate tax is historic. It will give a great stimulus to #MakeInIndia, attract private investment from across the globe, improve competitiveness of our private sector, create more jobs and result in a win-win for 130 crore Indians”.