In a major move that is expected to boost India's sluggish economy, Finance Minister Nirmala Sitharaman announced on Friday a slew of measures including the slashing of the corporate tax rates for domestic companies and for new local manufacturing firms.
Addressing a press meeting in Goa, Sitharaman said the new effective tax rate will be reduced from 30 percent to 25.17 percent, inclusive of all surcharges and cess for such domestic companies. "Such companies can also avoid paying the Minimum Alternative Tax," the finance minister added.
Provision inserted in IT Act:— PIB India (@PIB_India) September 20, 2019
A domestic company can pay income tax at 22% if they dont seek any exemption or incentives
Effective Tax Rate 25.17% inclusive of all surcharges and cess for such domestic companies
Such companies also not required to pay Minimum Alternative Tax pic.twitter.com/ojXYzwfXKx
The fiscal booster comes amid growing concerns over the economic slowdown. Following Sitharaman's announcement on tax exemptions, domestic equity benchmark BSE Sensex skyrocketed over 1300 points. The Sensex traded at 37,420.12 at 11:20 hours.
The new tax rate, which will promote investment and growth, will be applicable from the current financial year which began on April 1 and will be implemented through an ordinance to amend the Income Tax Act, 1961.
The finance minister also said that the total revenue foregone with the reduction in corporate tax rate and other relief measures will be Rs 1.45 lakh crore per year.
"Any new domestic companies incorporated on or after October 1, 2019, making fresh investment in manufacturing will have an option to pay income tax at 15 per cent," Sitharaman said at a press briefing in Goa. Sitharaman also clarified saying that the corporate tax rate will be 22 per cent for domestic firms if they do not avail any incentive or concession.
Announcing another major relief, the finance minister said that the listed firms, which have announced a buyback of shares prior to July 5, will not be charged with super-rich tax.