{"id":24801,"date":"2019-09-20T19:45:14","date_gmt":"2019-09-20T14:15:14","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=24801"},"modified":"2020-08-26T12:17:41","modified_gmt":"2020-08-26T06:47:41","slug":"historic-tax-reform-reduction-in-corporate-taxes","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/historic-tax-reform-reduction-in-corporate-taxes\/","title":{"rendered":"Historic Tax Reform: Reduction in Corporate Taxes"},"content":{"rendered":"

In a recent announcement, the Finance Minister of India, Nirmala Sitharaman<\/strong>[1]<\/a><\/sup> slashed corporate tax rates. The government did reduction in corporate taxes rate to 22% from the reigning tax slab of 30%. Additionally, the tax rate for the new manufacturing company has been reduced to 15% from the prevailing rate of 25%. <\/p>\n\n\n\n

The news came as a part of series of measures practiced by the government to strengthen the falling economic growth. The economic growth has been down below the 5% mark. The impact of this decision is positive for the markets. The move was welcomed by the investors as well as the corporate world. However, the government will lose 1.45 lakh crores in revenue as an adverse impact of the decision.<\/p>\n\n\n\n

The domestic company can pay 22%\ntax, excluding cess and surcharge. The effective tax rate after accounting<\/a> for\ncess and surcharge will be 25.17 %. The effective tax rate, including cess and\nsurcharge, will be 17%.  <\/p>\n\n\n\n

There is another beneficial provision for manufacturing companies. The manufacturing companies incorporated after October 2019 and commence production before March 23 will pay 15 % corporate tax in place of 25 %. The companies will pay tax as per the prevailing income tax slab<\/strong><\/a> after the expiry of their tax holiday period.<\/p>\n\n\n\n

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Image Source- Press Information Bureau<\/a>
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Additionally, enhanced surcharge announced during the budget session is not applicable to capital gains arising on the sale of any securities. These securities include derivatives in the hands of foreign portfolio investors<\/strong><\/a>. The capital gain that arises as a result of the sale of equity shares in a company or in a unit of a business trust or an equity fund liable to the tax under securities transaction tax is also exempted from tax purview.<\/p>\n\n\n\n

For the listed companies, the\ncompanies that announced a buyback of shares before July 2019 are not liable to\npay tax ohm buyback of shares. The tax rates are applicable from the current\nfiscal year that began on April 1, 2019.<\/p>\n\n\n\n

Further, the Minimum Alternative Tax rate<\/strong><\/a> has been reduced to 15 % from the existing 18.5 %for companies which opt for incentive or exemptions.<\/p>\n\n\n\n

The government has expanded the scope of spending 2 % of\nprofits on corporate social responsibilities. Entities can now spend the amount\non incubators, research grants to institutes that are promoting scientific\nresearch.<\/p>\n\n\n\n

“Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue,”- Quoted by the Finance Minister.<\/strong><\/em><\/p><\/blockquote>\n\n\n\n

The\nReactions<\/strong><\/h2>\n\n\n\n

After the Reduction in Corporate Taxes, The market<\/a> responded positively after the announcement. Major industrial chambers and federations appreciated the move of the finance ministry.<\/p>\n\n\n\n

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Slashing tax rates is a bold and timely move from @PMOIndia<\/a> and Hon. @nsitharaman<\/a> that promises to set the economy on a new growth trajectory. Grateful to Government for this great decision. ~ @vikramkirloskar<\/a>, President, CII @FinMinIndia<\/a> @nsitharamanoffc<\/a> @PIB_India<\/a> @PTI_News<\/a> pic.twitter.com\/uPATOk6f5C<\/a><\/p>— Confederation of Indian Industry (@FollowCII) September 20, 2019<\/a><\/blockquote>