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Government brings Taxation Laws (Amendment) Ordinance, 2019 slashing corporate tax rates to boost investment - (20 Sep 2019)

Direct Taxation

In order to make certain amendments in the Income-tax Act, 1961 and the Finance Act, 2019, the Government has brought in the Taxation Laws (Amendment) Ordinance, 2019. The Central Government has taken this decision in wake of prevailing market conditions and slump in economic growth. A new provision has been inserted in the Income-tax Act with effect from FY 2019-20 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 for enhancing growth and investment. The effective tax rate for these companies will be reduced from 34% to 25.17% inclusive of surcharge & cess. Further, such companies will not be required to pay Minimum Alternate Tax.

Further, for giving boost to ‘Make-in-India’ initiative of the Government, another new provision has been inserted allowing any new domestic company incorporated on or after 1st October 2019 making fresh investment in manufacturing, 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. The effective tax rate for these companies will be reduced from 29% to 17.01% inclusive of surcharge & cess. These Companies will be exempted from paying Minimum Alternate Tax. The total revenue loss for the reduction in corporate tax rate is estimated at Rs. 1,45,000 crore.

In order to stabilise the flow of funds into the capital market, enhanced surcharge introduced by the Finance Act, 2019 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 securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP. The enhanced surcharge will also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs). Tax on buy-back of shares will not be charged on listed Companies which have already made a public announcement of buy-back before 5th July 2019. The Government is continuously taking steps to facilitate production and GDP growth of the economy. The decision will not only infuse confidence in the Corporate Sector but also encourage in promoting “Make in India” initiative.


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