New companies incorporated after 01 Oct 2019 to attract 15% corporate tax rate
The Government of India has announced a significant reduction in corporate tax rate for domestic company to 22%, if they do not seek any exemption or incentives. Effective Tax Rate would be 25.17% inclusive of all surcharges and cess for such domestic companies. Such companies are also not required to pay Minimum Alternative Tax.Any new domestic company incorporated on or after 1st Oct 2019 making fresh investment in manufacturing will have an option to pay income tax at rate of 15%. Effective tax rate for new mfg cos would to be 17.01% inclusive of surcharge and cess.
The government has announced relief to listed companies which have already made a public announcement of buy-back before 5 July 2019. No tax on buy-back of shares in case of such companies will apply.
For stabilizing flow of funds into the capital market, the government has announced that the enhanced surcharge under Finance (No.2) Act, 2019 will not to apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for STT
In order to provide relief to companies which continue to avail incentive or exemptions, even for them the government has provided a Minimum Alternate Tax(MAT) relief, and the MAT rate has been reduced for them to 15% from the existing 18.5%.
Total revenue foregone for the reduction of corporation tax is Rs 1.45 trillion per year
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