Following the recent trend of weekly announcements of various reforms to boost the Indian economy, the Government today has brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance (No. 2) Act 2019. The salient features of these amendments are as under:-
- In order to promote growth and investment, with effect from FY 2019-20, any domestic company will have 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 & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.
- In order to attract fresh investment in manufacturing and thereby provide boost to ‘Make-in-India’ initiative of the Government, any new domestic company incorporated on or after 1st October 2019 making fresh investment in manufacturing, will have 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 shall be 17.01% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.
- Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%.
- In order to stabilize the flow of funds into the capital market, the enhanced surcharge that is recently introduced 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, in the hands of an individual, HUF, AOP and BOI.
- 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).
- In order to provide relief to listed companies which have already made a public announcement of buy-back before 5th July 2019, the tax on buy-back of shares in case of such companies shall not be charged.
- The Government has also decided to expand the scope of CSR 2 % spending. Now CSR 2% fund can be spent on incubators funded by Government and making contributions to public funded Universities, IITs, National Laboratories, etc. engaged in conducting research in science, technology, engineering and medicine.
By providing the above tax concessions and reliefs, the government is estimating a revenue loss of around INR 145,000 crore but at the same time it believes that this will certainly bring more investments in India, boost employment and economic activity and thereby generate more revenue.
(ref: Press Release posted on pib.gov.in on September 20, 2019 by Press Information Bureau, Delhi)
