The
Finance Minister, Mrs. Nirmala Sitharaman on 20th September has taken a new
decision for the Indian economy by unveiling a tax bonanza for Indian
Companies. As per the historic move, Nirmala Sitharaman announced a deduction
in the country's corporate tax rate to 22% (effective rate of 25.17% including
cess and surcharge) for existing firms, and to 15% (effective rate 17.01%) for
new domestic firms in the manufacturing sector. The recent measure has aimed to
pull the economy out of a six-year low growth and to address a 45-year high
unemployment rate by reviving private investments with a Rs 1.45-lakh crore tax
break.
Alternatively,
this is one of the major policy reforms since 1991. However, the companies who
do not avail any additional incentive or commission, the effective tax rate
would be just 22%. Meanwhile, many of India's prominent equity markets
applauded the decision, the bond market stuck in between the fear that the
government may now have to borrow more to meet its liabilities.
The
reduction in corporate taxes could stimulate growth, which will depend on what
the companies do with the taxes they have accumulated. There are many IT
companies which are likely to benefit from a reduction in corporate tax rates,
as per the economic analyst.
Here are
the two new provisions petitioned by the Finance Minister to promote growth and
investment-
Ø A
domestic company has to pay a reduced corporate tax of 22% with effect from the
financial year 2019-20. Besides, the reduced corporate tax can be availed on
the condition that companies should not claim any exemptions or under the income tax law. For now, the
effective corporate tax rate is 25.17% including surcharge ad cess. This
provision is not mandatory and domestic companies may either pick the benefits
or pay the applicable tax rate and claim the exemptions.
Ø The
second reason for the incorporation of such amendment has been introduced to
encourage manufactures and boost make in India which will be implemented on or
after 1 October 2019. The benefit is available with effect from the FY
2019-20
Corporate
Tax in India
According
to the Income Tax Act Rule,
the Domestic, as well as foreign companies, are liable to pay corporate tax.
While a domestic company is taxed on its universal income, a foreign company
will be taxed on the income earned within India. The Corporation tax is imposed
on the net income of the company, both private and public which are registered
in India under the companies act 1956. In addition to that, surcharge at the
rate of 5% is levied if net income is in the range of Rs 1 crore to Rs 10
crore. If the net income exceeds Rs 10 cr, surcharge at the rate of 10% is
levied.
At last,
it would be exhilarating to see this tax cut will give companies a bit more
financial space to maintain operations, create more employment and the growth
of the economy.
For more
details about corporate tax and efiling
of income tax return visit our website : https://www.allindiaitr.com
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