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Sitharaman announces cut in taxes for corporate, new manufacturing companies

Panaji, Sep 20 (UNI) In an effort to promote growth and investment in the country, Union Finance Minister Nirmala Sitharaman on Friday announced cut in corporate tax rates to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies, besides other fiscal measures. Addressing a press conference at a hotel near the city, she announced that government had brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance Act 2019.

”Today we proposed to slash the tax rates for corporate companies and also for new manufacturing companies. There are other fiscal reliefs also which we are bringing about. And this set of amendments are bring brought about in the taxation laws through an ordinance which has been passed. These are amendments to the Income Tax Act 1961 and Finance (No 2) Act of 2019,” she said.

Ms Sitharaman said in order to promote growth and investment, a new provision had been inserted in the Income Tax Act with effect from Fiscal Year 2019-20 which allowed any domestic company an option to pay income tax at the rate of 22 per cent subject to condition that they would not avail any exemptions or incentives. ”The effective tax rates for thses companies shall be 25.17 per cent, inclusive of all surcharge and cess. Also such companies would not be required to pay Minimum Alternative Tax (MAT),” she said.

The minister said in order to attract fresh investment in manufacturing and thereby to provide boost to Make in India, another provision had been inserted in the Income Tax Act with effect from fiscal year 2019-20 which provided any new domestic company incorporated on or after October 1, 2019, making fresh investment in manufacturing, an option to pay income tax at the rate of 15 per cent.

”This benefit is available to companies which do not avail any exemptions or incentives and commences their production on or before March 31, 2023. The effective tax rate for these companies 17.01 per cent, inclusive of all surcharges and cess. Such companies too will not be required to pay any MAT,” she said. ”A company does not opt for the concessional tax regime and avails tax exemption or the incentives shall continue to pay tax at the pre-amended rate.

However, these companies can opt for the concessional tax regime after expiry of their tax holiday or exemption period. However, these companies can opt for concessional. After exercise of the option, the companies shall be liable to pay tax at the rate of 22 per cent and option once exercise cannot be subsequently withdrawn,” she said.

Ms Sitharaman said in order to provide relief to the companies which continued to avail exemptions and incentives the rate of Minimum Alternative Tax had been reduced from existing 18.5 per cent to 15 per cent.  She said in order to stabilise flow of funds into the capital market enhanced surcharged introduced by Finance (No2) Act 2019 would not apply on capital gains arising on sale of equity share in a company or a unit of equity oriented firm or a unit of business trust liable for security transaction tax in the hands of individuals, Hindu Undivided Family (HUF), Association of Persons (AOP), Body of Individuals (BOI) and Artificial Juridical Person (AJP).

The enhanced surcharge would also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs). In order to provide relief to listed companies which had already made a public announcement of buy-back before July 5, 2019, it was provided that tax on buy-back of shares in case of such companies would not be charged. She said government had also decided to expand the scope of CSR two per cent spending.

The total revenue foregone for the reduction in corporate tax rate and other relief was estimated at Rs 1,45,000 crore, she added. Ms Sitharaman said the steps were taken as the government wanted more investment in Make In India which would mean more employment and economic activity bringing more revenue. When asked about fiscal deficit target, she said the economy itself would generate more revenue the moment taxes were brought down as mass base had been broadened. ”Yes we are conscious of the impact all this will have on our fiscal deficit… We are quite seized of all these details,” she said.