Indian Government has come up with the Taxation Laws (Amendment) Ordinance 2019 to amend the Indian corporate tax rate and provide other major relief for certain companies on 20th September 2019, Friday.
1. The tax rate has been cut down from 30%(25 % if turnover of the company does not exceed INR 4 billion in the previous year) to 22%(plus applicable surcharge and cess) for domestic companies’ subject to the condition that they will not avail any exemption/ incentive. The requirement to pay Minimum Alternate Tax (‘MAT’) has also been removed for such companies.
2. In case of new domestic manufacturing companies incorporated on or after 1st October 2019 has an option to pay tax at the rate of 15%(plus applicable surcharge and cess) instead of 30% (25 % if turnover of the company does not exceed INR 4 billion in the previous year) subject to the condition that they will not avail any exemption/ incentives and commenced their production on or before 31stMarch, 2023.These companies are also not required to pay MAT.
3. Any company doesn’t opt the above tax benefit and continue availing various tax exemptions has to pay tax at the pre-amended rate. After the expiry of tax exemption, they have an option to pay income tax at a rate of 22% subject to not availing any exemption/incentive. For claiming reduced tax rate 22% and 15% respectively, income is to be computed without claiming certain deductions and any loss carried forward from earlier years which is attributable to such deductions cannot be set off while computing income; Further, it would be deemed that full effect of such loss has already been given and no further deduction would be allowed for such loss in future.
4. Existing rate of Minimum Alternate Tax forthe companies have been reduced from 18.5% to 15%.
5. Removal of Enhanced surcharge on capital gains arising on sale of equity shares in a company, equity-oriented fund, unit of a business trust liable for Securities Transaction Tax (‘STT’), in the hands of Individual, Hindu Undivided Family (‘HUF’), Association of Persons (‘AOP’), Body of Individuals (‘BOI’) and Artificial Juridical Person (‘AJP’).
6. Capital gains arising on sale of any securities including derivatives in the hands of Foreign Portfolio Investors will not be liable to pay enhanced surcharge.
7. The Government has provided relief that the tax implemented on buy back of shares of listed companies will not be applicable if the company has made a public announcement of such buy-back before 5th July 2019.
8. Extended the scope of CSR 2% fund spending on incubators funded by central or state government, and agency or PSU of Central or State Government and making contributions to public funded Universities, National Laboratories and Autonomous Bodies engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs(Social Development Goals).
