In an unprecedented move, GoI has slashed much awaited Corporate Tax rate for the large Corporate to 22% with the effective rate, including surcharge standing at 25.17% for the current fiscal year for the existing companies whereas new companies(MSME) will have to pay 15% tax. The surprise move comes on the back of dwindling GDP growth, which has dropped down to 5% in Q1 FY19-20, that too, not as part of the general budget when such big bang reforms are announced, but as a booster to strengthen the economy in the mid year.
The salient features of today's announcement include:-
*22% for companies availing incentives and/or exemptions; no minimum alternate tax (MAT).
*Domestic Manufacturing Companies incorporated on or after 1st August 2019 will have to pay a tax rate of 15% that will effectively be @17.01% inclusive of surcharge. Only condition being production to commence by 31st March 2023.
*Company availing incentives and/or exemptions, Minimum Alternate Tax (MAT) stands reduced from 18.5% to 15%.
*Scope of CSR spending widened to cover Central/State/PSU promoted Incubators and Public funded Universities to the extent of 1.2% out of the mandated spending of 2%.
*Another sop announced in the form of No Tax on the buy-backs announced by the listed companies by 5th July 2019.
*Enhanced surcharge won't be applicable to Capital Gains arising out of sale of equities or equity oriented funds where STT is levied, including derivatives trade by FPIs.
In view of spate of Economy booster doses announced by GoI over a period of last 2-3 weeks, this being 4th in a row, stock market SENSEX rose by 2000 points (intra-day), which was biggest rally in the last 10 years. Though stock market is not the barometer of the Indian Economy yet it reflect Investor sentiments. These announcements might bring back Foreign Portfolio Investors (FPIs) back to Capital Markets. These tax cuts are likely to cost exchequer Rs 1.45 lakh crores. Stock Market experts and Corporate leaders termed these announcements as Master stroke, bigger than last 20 budgets and Big-bang reform, which will firmly revive growth and investment.
Keep watching this space for the latest updates on the Indian Economy!
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