Press Release: CITI Hails Corporate Tax Cuts by the Hon’ble Finance Minister – A Major Boost to the Indian Economy
New Delhi, Friday, 20th September 2019: The Hon’ble Finance & Corporate Affairs Minister, Smt. Nirmala Sitharaman, today made a major announcement by slashing the Corporate Tax on existing companies to 22% and new companies to 15%, in a Press Conference from Goa. Shri T. Rajkumar, Chairman, CITI applauded the measures as a welcome step in the right direction at an opportune time. These steps will help boost the investment and create employment opportunities in the Indian economy.
Shri T. Rajkumar stated that the Government has made certain amendments in the Income-tax Act 1961 and the Finance (No.2) Act 2019 through Taxation Laws (Amendment) Ordinance 2019. The new provision gives new domestic companies incorporated on or after 1st October 2019 an option to pay income-tax at the rate of 15% on fresh investment. The benefit will be available to the companies which do not opt any exemption/ incentive and commences their production on or before 31st March 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).
Shri T Rajkumar pointed out that companies which do not opt for the concessional tax regime and avails the tax 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. The existing companies opting for 22% income tax slab won’t have to pay MAT and the effective rate for such companies will be 25.17% including surcharges, cess. He further pointed out that in order to provide relief to companies which continue to avail exemptions/ incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%.
Chairman CITI also stated that to stabilise the flow of funds into the capital market, the enhanced surcharge shall not 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 securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP. Foreign Portfolio Investors (FPIs) have also been excluded from the enhanced surcharge on the capital gains arising on sale of any security including derivatives.
Shri Rajkumar further stated that the decision of exemption of tax to the listed companies which have already made a public announcement before 5th July 2019, on buy-back of shares, is a welcome step. He also appreciated the expansion of scope of CSR 2% to incubators funded by Central or State Government or to public funded Universities, IITs, National Laboratories and Autonomous Bodies engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.
Shri Rajkumar thanked the Hon’ble Finance Minister and stated that the above decision now puts the India’s Corporate Tax at par with global rates. He further stated that these steps would give a big push to ‘Make In India’ initiative of the Government and attract fresh investment in the manufacturing sector thereby generating huge employment opportunities in the manufacturing sector.