Indian Government Slashes Down Corporate Tax to 25.17 Per Cent

In a bid to support the sinking economy, the Indian government has cut down corporate tax to 25.17 per cent, including all levies and surcharges, for domestic firms.
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Sep 20,2019
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  • 10 Mins Read

In a bid to support the sinking economy, the Indian government has cut down corporate tax to 25.17 per cent, including all levies and surcharges, for domestic firms. Recently, the Finance Minister, Nirmala Sitharaman announced that the decided tax rate will conform with the current financial year, which started on April 1.  

The government has taken this move to recover the Indian market from a depressed phase. With the release of the GDP report, the sagging status of the economy is revealed and thus, the government is amending policies and norms to alter the gloomy picture. 

The Indian economy is considered to be one of the fastest-growing economies. However, with the current slowdown, the country has lost its status to the neighboring country, China.  

In the announcement, the Finance Minister said the new rates would be equal to the lowest tax rates in the South Asian region and South-East Asia, as reported by the daily news, The Economic Times. 

Slashed Corporate Tax Caused Spike in Shares 

With the recent announcement of slashing down corporate taxes, the shares plunged upward in Mumbai. The surge in shares is recorded to the highest in the last ten years whilst the Indian currency, the rupee remained stable against the American dollar.   

At present, a condition like an exodus is arriving in the Indian stock market as the foreign funds have plummeted an aggregate of $4.9 billion in stocks since June, as reported by the daily news, The Economic Times.  

Amendments Done by the Indian Government 

In the recent meeting, the government has made significant changes in tax reforms for the economy’s elevation. 

  1. The new amendment is added in the income tax act w.e.f the financial year 2019-20 which permits any domestic firm to pay out an income tax at the rate of 22 per cent with the condition that the firm will not use any exemption or incentive. 
  2. Manufacturing firms, which have incorporated following October 1, 2019, will get an option to pay out 15 per cent levy. The levy rate for new manufacturing companies will be 17.01 per cent, including tax and surcharges. 
  3. Listed firms which have proclaimed buyback before July 5, 2019. These companies will not be levied on buyback of stakes. 
  4. An additional payment in the form of surcharge will not apply to capital gains on the sale of the security, comprising derivates controlled by FPIs. 
  5. The increased surcharge will not apply to capital gains which emerge from equity sale liable to Securities Transaction Tax (STT) to stabilize the flow of funds into capital markets. 
  6. To render relief to the companies which are employing benefits as well as concessions. A MAT relief by decreasing it from 18 per cent to 15 per cent. 
  7. CSR 2 per cent spending to consist PSU incubators and public-funded education companies, PSU incubators, IITs and governments.
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