Corporate Tax Rate Cut From 30% To 25.2% To Spur Growth

Nirmala Sitharaman

New Delhi, Sep 20: Finance Minister Nirmala Sitharaman announced reduction of corporate tax on domestic firms in a bid to boost the sluggish economy, hurt by slowing demand across sectors, especially manufacturing that is among the highest contributors to the Gross Domestic Product (GDP).

“To promote growth, a new provision has been inserted in the income tax act with effect from fiscal year 2019-20, which allows any domestic company to pay income tax at the rate of 22% subject to condition they will not avail any incentive or exemptions To provide relief to companies which continue to avail incentive or exemptions, even for them we are giving a Minimum Alternate Tax(MAT) relief, the MAT rate has been reduced to 15% from the existing 18.5%,” Sitharaman said.

She said the new effective tax rate will be reduced from 30 per cent to 25.2 per cent, which includes all surcharges and is applicable on those companies that aren’t availing any incentives.

Sitharaman said that the new companies coming up in manufacturing will be taxed at 15% if they forego exemptions and incentives. She further added that MAT relief will be given to those opting to continue paying surcharge and cess. MAT has been reduced to 15 per cent from 18.5 per cent for companies who continue to avail exemptions and incentives.

The markets immediately rose after the announcement, with the benchmark Sensex surging over 1,600 points and Nifty climbing above 10,900 mark, after days of choppy trading. “Relief to listed companies which have already made a public announcement of buy-back before 5th July 2019. There will be no tax on buy-back of shares in case of such companies ,” he said.

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