The finance minister Nirmala Sitharaman has announced to cut the corporate tax rates for domestic and new manufacturing companies. This provision has come as a big relief for India Inc. as it will boost growth and investment.

The existing corporate tax rate has now come down to 22% from 30% for domestic companies. After all surcharges and cess, the effective corporate tax rate will 25.17%. For new manufacturing companies the corporate tax rate will be 15% as compared to previous 25%. The effective tax rate however is 17% inclusive of surcharges and cess.

“In order to promote growth and investment, a new provision has been included in the Income Tax act, which allows any domestic companies an option to pay income tax at the rate of 22% without exemptions. Amendments will be made through an ordinance to IT Act. These companies will not be required to pay MAT,” Sithraman was quoted as saying at a press conference ahead of the GST Council meet in Goa.

The new corporate tax rate will be applicable to all the companies from the ongoing fiscal year, which kicked off on April 1, 2019.

The finance minister further added that the reduction in the corporate tax will generate revenue of INR 1.45 lakh crore (approx. USD 20.44 bn) for the Industry, annually. The move taken by the Indian government will boost the country’s growth and attract investment from international players.

“Tax concessions will bring investments in Make in India, boost employment and economic activity, leading to more revenue,” said the finance minister.

An ordinance will be introduced to update the changes in the Income Tax Act and Finance Act. Companies can make most of lower corporate tax rates after the expiry of concessions and tax holidays that they are availing.


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