The Finance Minister today has announced a cut in the basic corporate tax rate to 22% from the earlier 30% and for new manufacturing companies it has been cut down to 15% from 25%. This is part of a series of measures by the government to boost the economy and arrest a slowdown.

As per a press note released by the government, “In order to promote growth and investment, a new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22% subject to condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17% inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT)."

To boost the manufacturing sector under as part of the ‘Make in India’ initiative, the government announced that any new domestic company incorporated on or after 1^st October 2019 making fresh investment in manufacturing, has an option to pay income-tax at the rate of 15%. This benefit is available to companies which do not avail any exemption/incentive and commence their production on or before 31st March 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge and cess.  Also, such companies shall not be required to pay Minimum Alternate Tax.

Also, the enhanced surcharge which was announced in the Budget will 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 STT (Securities Transaction Tax).

The new tax rate will be applicable from the current fiscal which began on April 1, 2019.

This announcement brings pre-Diwali cheer to the business community and the Sensex soared over 1900 points in its highest single day gain in 10 years.

GlobalLinker member and tax expert Ritul Patwa welcomed this move and stated, “The biggest push is to the manufacturing sector, with a reduced rate of tax at 15% and removal of MAT provisions. This will result in a big push for the manufacturing and employment growth in the country.”