Impact of corporate tax rate cut on firms, economy: Explained in six chart

The government significantly reduced corporate tax rates on Friday, boosting investor sentiment in the midst of a severe slowdown. Big companies got a relief of close to 10 percentage points in the effective tax rate (Chart 1), including cess and surcharge. 

After this cut, base corporate tax rate in India has become competitive and should help boost investment (Chart 2). Reduction in corporate tax was a long-pending demand of Indian firms. India is likely to attract investors looking to move out of China. 

This might expand the corporate universe as new firms will now be taxed at 15 per cent.