FM Nirmala Sitharaman Announces Corporate Tax Rate Cuts: 7 Highlights

In a major move, Finance Minister Nirmala Sitharaman made several announcements for the corporate sector. The minister announced deep corporate tax cuts among a series of announcements. Sitharaman said the total revenue lost due to today’s measures would be 1.45 trillion rupees per year.

Here are the highlights

1. All domestic corporations will be allowed to pay corporation tax at the rate of 22% (25.17% effective rate, including tax and surcharge). This would be subject to the condition that these companies do not benefit from any tax incentives or exemptions. In addition, no alternative minimum tax (MAT) would be imposed on these companies.

2. Any new domestic manufacturing enterprise, incorporated on or after October 1, 2019, will be entitled to pay corporation tax at the rate of 15% (effective rate of 17.01%). No MAT will be imposed on these companies either. This will be subject to the condition that the company does not benefit from any tax incentives or exemptions and begins production by March 31, 2023. Companies that currently benefit from tax exemptions can join the new scheme once their period of tax exemption ended, announced the minister.

3. To provide relief to businesses that continue to benefit from exemptions and incentives, the MAT rate has been reduced from 18.5% to 15%.

4. The enhanced surcharge introduced by the Finance Act 2019 does not apply to capital gains resulting from the sale of equity shares in a company/share-based fund unit or business trust unit subject to the tax on securities transactions, announced the FM.

5. The enhanced surcharge does not apply to capital gains on the sale of securities, including derivatives, in the hands of foreign portfolio investors (REITs)

6. Relief for listed companies that have already made a public takeover announcement before July 5, 2019. No share buyback tax in the case of such companies.

7. The Minister of Finance also announced an expansion of the scope of CSR activities. Companies can now spend 2% of the money in state or union incubators, UAPs, state universities, IITs, state-funded entities.

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