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Finance Minister announces major reduction in Corporate Tax Rates

Finance Minister Smt. Nirmala Sitharaman at the 37th GST Council Meet held today i.e. September 20th 2019 has announced to reduce the corporate taxes for domestic companies and new local manufacturing companies through an ordinance.

The highlights of the Taxation Laws (Amendment) Ordinance of 2019 (“Ordinance”) are enumerated below:

  • A new provision has been inserted in the Income Tax Act, 1961 (“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.
  • Another new provision has been inserted in the Act with effect from FY 2019-20 which allows any new domestic company incorporated on or after 1stOctober 2019 making fresh investment in the manufacturing sector, with 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 commences their production on or before 31st March 2023.
  • Under the new provisions, the companies can also opt for the concessional tax regime after expiry of their tax holiday/exemption period that they are currently availing.
  • The enhanced surcharges 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 (“STT”).
  • Further, the enhanced surcharge shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).
  • As an additional relief, the listed companies which have already made a public announcement of buy-back before 5th July 2019, shall not be charged with tax on buy-back of shares.
  • The companies will now be allowed to spend 2% of their CSR funds on incubators funded by Central or State Government or any agency or Public Sector Undertaking of Central or State Government, and for making contributions to public funded Universities, IITs and National Laboratories etc.