FM Nirmala Sitharaman announces corporation tax rate cuts: 7 Highlights

Nirmala Sitharaman at press conference in Goa. Photo: ANI

In a major move, Finance Minister, Nirmala Sitharaman made several announcements for the corporate sector. The minister announced sharp cuts in corporation tax among a series of announcements. Sitharaman said the total revenue forgone on account of today's measures would be Rs 1.45 trillion per year.

Here are the highlights

1. All domestic companies to be allowed to pay corporation tax at the rate of 22% (effective rate 25.17% including cess and surcharge). This would be subject to the condition that these companies do not avail of any tax incentives or exemptions. Moreover, no Minimum Alternative Tax (MAT) would be imposed on these companies.

 

2. Any new domestic manufacturing company, incorporated on or after October 1, 2019, will be allowed to pay corporation tax at the rate of 15% (effective rate 17.01%). No MAT will be imposed on these companies either. This will be subject to the condition that the company does not avail of any tax incentives or exemptions and commences production by 31 March, 2023. Companies that are availaing tax holidays at present can join the new regime once their tax holiday period ends, announced the minister.

 

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

 

4. Enhanced surcharge introduced by the Finance Act 2019 shall not apply to capital gains arising on sale of equity share in a company/unit of equity-oriented fund or unit of business trust liable for securities transaction tax, the FM announced.

 

5. Enhanced surcharge shall not apply to capital gains on sale of any securities, including derivatives, in the hands of Foreign Portfolio Investors (FPIs)

 

6. Relief to listed companies which have already made a public announcement of buyback before 5th July 2019. No tax on buyback of shares in case of such companies.

 

7. The finance minister also announced an expansion in the scope of CSR activities. The companies can now spend 2% of the money on state or union govt incubators, PSUs, state universities, IITs, public-funded entities.