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Corporate tax cut: Highlights, key takeaways

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Panaji, Sep 20: Following are the highlights of the announcements made by Finance Minister Nirmala Sitharaman on reduction in corporate tax and other fiscal relief measures for the economy to promote growth and investment:

Corporate tax cut: Highlights of announcements made by FM
  • Corporate tax rate has been slashed to 22 per cent for domestic companies not availing any incentives/exemptions; earlier rate 30 per cent
  • Effective tax rate for such companies now stands at 25.17 per cent including cess and surcharge; earlier it was 34.94 per cent
  • Also, such companies shall not be required to pay Minimum Alternate Tax (MAT)
  • New domestic companies incorporated on or after Oct 1, 2019, making fresh investment in manufacturing can pay income-tax at a rate of 15 pc; the earlier rate was 25 pc
  • However, lower tax is applicable if the companies do not avail any exemption/incentive, and commence production by March 31, 2023
  • Their effective tax rate will be 17.01 per cent inclusive of surcharge and cess; earlier the rate was 29.12 per cent
  • These companies, too, will not be required to pay MAT
  • For cos which continue to avail exemptions/incentives, the MAT has been reduced from 18.5 per cent to 15 per cent
  • Enhanced super-rich tax on capital gains on sale of share in hands has been removed
  • Enhanced surcharge will also not apply to capital gains on sale of security in hands of foreign portfolio investors (FPIs)
  • Enhanced surcharge introduced in Budget shall not apply on capital gain arising on sale of equity shares in a Co liable for Securities Transaction Tax (STT)
  • No tax on buyback of shares if companies have made announcement regarding it before July 5 2019
  • Scope of corporate social responsibility (CSR) activities has been expanded
  • Lower tax rates are effective from April 1, 2019
  • Changes in Income Tax Act, 1961 and Finance Act, 2019 made through an ordinance.
  • Revenue foregone for reduction in corporate tax and other relief is estimated at Rs 1.45 lakh crore

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