Apropos the report "Budget to help India Inc save Rs 25,000 cr in 2 years" (March 2), the actual savings on account of tax may be much lower than the figure reported, and thus, end up being eyewash. A 15 per cent allowance on capital expenditure investment in plant and machinery in the next two years will no doubt bring down the taxable income, but this allowance will not affect the book profits for the purpose of the Minimum Alternate Tax (MAT) calculation. This additional tax benefit, along with the existing depreciation benefits (including the additional depreciation in the first year), in all probability will make the taxable income negative or lower than the book profit. In such a situation, such companies will be required to pay taxes under provisions of MAT at 20.96 per cent on their book profits. Thus, effectively, the savings on account of tax outgo will be much lower than estimated or reported.
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Correction
With reference to his letter, Raj Bagri has clarified that the MAT rate is 20.96 per cent (18.5 per cent + surcharge + education cess, presuming the income to be over Rs 10 crore), and not 22.66 per cent as mentioned by him.
Raj Bagri Kolkata
Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number
Correction
With reference to his letter, Raj Bagri has clarified that the MAT rate is 20.96 per cent (18.5 per cent + surcharge + education cess, presuming the income to be over Rs 10 crore), and not 22.66 per cent as mentioned by him.