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CORPORATE TAX DEDUCTIONS

How times change things and events! After a reign of about six decades (58 years to be precise) the Indian government has decided to review the Income-tax amendment act of 1961 which has resulted in the reduction of the Corporate tax payable to the government. This novel idea is done in the spirit of bringing growth and development to the people and it is a welcome development given the global economic realities of the times that we live in.

Now, let us go into the details of the major changes that have been signe into law effective 1st of April 2019 as it affects major players in the Indian economy: 

For Indian Companies

If an Indian company does not call for any tax incentives or tax exemptions, they will pay income tax at the rate of 22%. The total corporate tax payable by the companies of Indian extraction who abides by the above rule will amount to only 25.17% effective from April of 2019. Also, the target is to induce growth and development of the companies and by proxy the Indian nation at large. Added to this, the companies who comply with the condition state above will also be exempted from Minimum Alternate Tax (MAT). 

Manufacturing Sector:

Moving on to the manufacturing sector of the Indian economy, the pronounced amendment will also give them an option to pay Corporate tax at the rate of 15% which is also included in the act. New Indian companies that come upon on after the 1st of October 2019 will be affected by the policy. The goal is to make the Indian initiative a reality. Any company that maintains the status quo above and begins operation from now till March 31st, 2023 will pay a reduced Cooperate tax of 17%. For hotels with Rs 1,001-7,500, the rate is 12%; those with Rs 7,500 a night or more, the rate is 18%. 

The Take On Buy Back Shares

The former practice was for listed companies to pay buyback distribution tax, the new act has included unlisted companies in the regime. For companies that have made a public announcement of their buyback shares before July 5th, 2019, Corporate tax shall not be charged on those companies. This step is a fair bargain for domestic companies and it will provide an enabling environment for the government to get what is due to them from the local companies which are needed for growth and development. 

This initiative of the government to cut down on Corporate tax is a welcome development that will produce the enabling environment for local companies to thrive which will have a positive bearing on the people in the months to come. Also, this will boost the economy across all the sectors in India. These are happy days for domestic companies in India because the setting is conducive for them to thrive economically. It is equally hope that their foreign counterparts doing business in India will also have reason to cheer for doing business in India.

Post Author: Legalesolutio

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