Latest Announcements at the Finance & Corporate Affairs Press Conference
The Government has brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance (No. 2) Act 2019
Reduction in Corporate tax rates is a historic and great move that will go a long way in making India a manufacturing hub on the global manufacturing map. This will certainly attract more capital, technology and improve India’s overall growth. The rate cuts shall apply from the fiscal year April 1st, 2019 to March 2020, key changes are as under –- Corporate tax cuts reduced by 8% from 30% to 22% – Across all sectors for Any Domestic Companies.
Effective from FY 2019-20, domestic company has an option to pay income-tax at the rate of 22% subject to condition that they will not avail any exemption/incentive.
The effective tax rate for these companies shall be 25.17% inclusive of surcharge & cess.
Also, such companies shall not be required to pay Minimum Alternate Tax.
- New Domestic Manufacturing Companies to be taxed @ 15 %- Incorporated after October 1, 2019 and commences production before March 31, 2023
This would also pave the way for Corporate restructuring by setting up subsidiaries for new businesses or projects to avail tax efficiency. The effective tax rates @ 17.10 % after surcharge and cess brings India very close to the tax rates of Singapore without considering the dividend distribution taxes.
Also, such companies shall not be required to pay Minimum Alternate Tax
- MAT i.e. tax payable on accounting profit lowered from 18.50% to 15 %
- Capital gains: No enhanced surcharge and revert back to old capital gains tax rates
This effectively means that we go back to the pre-July 5 regime on capital gains where LTCG tax is applicable at an effective rate of 11.9 percent vs the 14.2 percent proposed in budget 2019 for high-income earners.
Short term capital gains tax remains at 17.9 percent vs 21.3 percent, which had become the new rate post the passing of the Finance Act 2019.
- Partial relief in buyback tax- Buybacks announced before the Budget 2019 not to attract 20 % tax
- The Scope of Spending of CSR Funds Expanded- Now CSR 2% fund can be spent on Government-funded Universities, IITs, National Laboratories and Autonomous Bodies engaged in conducting research in science, technology, engineering and medicine