In a major fiscal booster, the government on Friday has slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies. Making the announcement, Finance Minister Nirmala Sitharaman said the new tax rate will be applicable from the current fiscal which began on April 1.
Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually. This, she said is being done to promote investment and growth. In effect, the corporate tax rate will be 22 per cent for domestic companies, if they do not avail any incentive or concession. The changes in the Income Tax Act and Finance Act will be made effective through an ordinance. The Minister also said companies opting for a 22 per cent income tax slab would not have to pay Minimum Alternate Tax (MAT). Sitharaman further said, new domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without any incentives. Meaning, the effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess. Sitharaman further said companies can opt for a lower tax rate after the expiry of tax holidays and concessions that they are availing now.
Domestic equity benchmark BSE Sensex skyrocketed over 1300 points in morning session on Friday after Finance Minister Nirmala Sitharaman announced a slew of measures to revive the ailing economy. In a major booster to the market, the government has decided to not levy the enhanced surcharge introduced in the Budget on capital gain arising on sale of equity shares in companies liable for securities transaction tax.
Also, the super-rich tax will not apply on capital gains from sale of any security including derivatives in hands of foreign portfolio investors. In another relief, the Minister said listed companies that have announced buyback of shares prior to July 5 will not be charged with super-rich tax. The 30-share index zoomed 1326.65 points, or 3.68 per cent, to 37,420.12 at 1120 hours, while the broader Nifty rose 362.95 points, or 3.39 per cent, to 11,067.75. Top gainers in the Sensex pack included Maruti, M&M, HDFC Bank, Tata Motors, Yes Bank, Tata Steel, L&T, ICICI Bank, Bajaj Auto and RIL, rallying up to 9 per cent. On the other hand, TCS and NTPC were trading in the red. The rupee too appreciated 66 paise to 70.68 against US dollar following the Finance Minister's announcements.