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P. 31
SEPTEMBER - 2019
Govt cuts Corporate taxes for Domestic Companies
exemption/incentive 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/exemption period. After the
exercise of the option they shall be liable to
pay tax at the rate of 22% and option once
exercised cannot be subsequently
withdrawn. Further, in order to provide
Union Finance Minister, Smt. Nirmala
Sitharaman in a significant announcement, relief to companies which continue to avail
slashed the effective corporate tax from 30 exemptions/incentives, the rate of
per cent to 25.17 per cent, inclusive of all Minimum Alternate Tax has been reduced
cess and surcharges for domestic from existing 18.5% to 15%.
companies.
* In order to stabilise the flow of funds into
Here are the highlights, according to a PIB the capital market, it is provided that
release: enhanced surcharge introduced by the
Finance (No.2) Act, 2019 shall not apply on
* In order to promote growth and capital gains arising on sale of equity share
investment, a new provision has been in a company or a unit of an equity oriented
inserted in the Income-tax Act with effect fund or a unit of a business trust liable for
from FY 2019-20 which allows any securities transaction tax, in the hands of
domestic company an option to pay an individual, HUF, AOP, BOI and AJP.
income-tax at the rate of 22% subject to
condition that they will not avail any * The enhanced surcharge shall also not
exemption/incentive. The effective tax rate apply to capital gains arising on sale of any
for these companies shall be 25.17% security including derivatives, in the hands
inclusive of surcharge & cess. Also, such of Foreign Portfolio Investors (FPIs).
companies shall not be required to pay
Minimum Alternate Tax. * In order to provide relief to listed
companies which have already made a
* In order to attract fresh investment in public announcement of buy-back before
manufacturing and thereby provide boost 5th July 2019, it is provided that tax on
to 'Make-in-India' initiative of the buy-back of shares in case of such
Government, another new provision has companies shall not be charged.
been inserted in the Income-tax Act with
effect from FY 2019-20 which allows any * The Government has also decided to
new domestic company incorporated on or expand the scope of CSR 2 percent
after 1st October 2019 making fresh spending. Now CSR 2% fund can be spent
investment in manufacturing, an option to on incubators funded by Central or State
pay income-tax at the rate of 15%. This Government or any agency or Public Sector
benefit is available to companies which do Undertaking of Central or State
not avail any exemption/incentive and Government, and, making contributions to
commences their production on or before public funded Universities, IITs, National
31st March, 2023. The effective tax rate for Laboratories and Autonomous Bodies
these companies shall be 17.01% inclusive
of surcharge & cess. Also, such companies (established under the auspices of ICAR,
shall not be required to pay Minimum ICMR, CSIR, DAE, DRDO, DST, Ministry of
Alternate Tax. Electronics and Information Technology)
engaged in conducting research in science,
* A company which does not opt for the technology, engineering and medicine
concessional tax regime and avails the tax aimed at promoting SDGs.
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