New Income Tax Rates Fy 2019 20

The Minister for Finance slashed the corporate tax and income tax rates to boost the economy of the country. Reducing corporate tax in India and other tax reliefs was announced during the press conference released on 20th September 2019. The reduction in income tax rates shall apply to all the MSMEs and SMEs in India. The implementation of the tax rate shall be added to the revised tax structure that was released in April 2019.

Reduction of Corporate Tax in India

During the press meet, the Minister informed that the Corporate Tax shall reduce from 30% to 25.17%. The reduction shall include surcharges as well as cess for the Indian companies. This new reduction in taxation shall increase productivity, boost investments and also create employment opportunities. The new tax rate includes a reduced minimum tax rate from 18.05% to 15%. The aim of reducing the minimum tax rate is to encourage Indian Companies especially in availing incentives and exemptions.

Applicability

MoF has implemented a reduced

income tax rate for domestic firms that was incorporated on or after October 1, 2019. The new manufacturing sectors can now pay the income tax at the rate of 15% without incentives. This implies that the new domestic firms shall pay tax at the rate of 17.01% including the surcharge and cess. Further, the Minister also informed that these companies are not liable to pay Minimum Alternative Tax. This tax rate shall apply for companies that commence its production on or before 31st March 2023.

Eligibility to avail 15% Income Tax Rate

To avail the 15% income tax rate, firms should not have availed for incentives
Companies incorporated before October 1, 2019, should not avail for incentives

MoF estimated to implement a total revenue foregone of Rs.1,45,000 crore per year in the new provision. The provision shall provide a sustainable environment for the manufacturing sector. It shall also balance the revenue foregone especially to support the enterprise.

No Enhanced Surcharge on Capital Gains

The Ministry informed that the enhanced surcharge shall not apply to any capital gains. The regulation focuses on increasing the input of capital funds for the domestic market. As per the Finance (No.2) Act 2019, the provision for nil surcharge shall apply only for the following:

Capital gains availed by the sale of the equity or
The unity of equity-oriented fund belongs to Security Transaction Tax (STT).

The regulation also stipulates that super-rich tax will not apply to the capital gains from any sale that is covered under Foreign Portfolio Investors (FPI).

Eligible Members for Cancellation of Enhanced Surcharge

Individual
Business Units
HUF (Hindu Undivided Family)
AOP (Association of Persons)
BOI (Body of Individuals)
AJP (Artificial Juridical Person)

Availing 22% of Tax for Domestic Firms

The new tax rate for the FY 2019-20 provides an option to pay corporate tax at 22% p.a. The new tax rate applies to all domestic firms. Domestic firms include all Indian SMEs and MSMEs who has not or will not avail any incentive or exemption. However, to avail at 22% tax filing slab, the domestic firms cannot avail any incentive or exemption. But to increase the support, MoF regulated that the companies need not have to pay the Minimum Alternative Tax (MAT).

Note: Companies that have availed incentive or exemption can opt for 22% income tax slab once incentive period expires.

Buy-Back of Shares

Super Rich Tax or buyback tax shall not apply to companies that have invested in themselves for acquiring buyback shares.

Corporate Social Responsibility (CSR)

To improve the ethics of

Corporate Social Responsibility (CSR), the MoF has diversified the scope by including Incubators, Educational Institutions, and National Laboratories. The companies can now provide 2% of CSR to the above-mentioned institutions. Other sectors to contribute 2% CSR

ICAR
ICMR
CSIR
DAE
DRDO
DST

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Frequently Asked Questions

Common questions about New Income and Corporate Tax Rates 2019.

The new corporate tax rate has been reduced from 30% to 25.17%, including surcharges and cess for Indian companies. This reduction aims to increase productivity, boost investments, and create employment opportunities.

The minimum tax rate has been reduced from 18.05% to 15%. This reduction aims to encourage Indian companies to avail incentives and exemptions, making it more attractive for them to invest and expand their operations.

To avail the 15% income tax rate, companies should be incorporated on or after October 1, 2019, and should not have availed any incentives. Additionally, these companies must commence production on or before March 31, 2023.

No, the enhanced surcharge will not apply to any capital gains. This move is aimed at increasing the inflow of capital funds into the domestic market.

The cancellation of the enhanced surcharge is applicable to individuals, business units, Hindu Undivided Families (HUFs), Association of Persons (AOPs), Body of Individuals (BOIs), and Artificial Juridical Persons (AJPs).

Domestic firms, including Indian SMEs and MSMEs, have the option to pay corporate tax at 22% per annum, provided they do not avail any incentive or exemption. However, these companies will not be required to pay the Minimum Alternative Tax (MAT).

No, the super-rich tax or buyback tax will not apply to companies investing in themselves by acquiring buyback shares.

The government has expanded the scope of CSR by including incubators, educational institutions, and national laboratories. Companies can now contribute 2% of their CSR funds to these institutions, in addition to other sectors like ICAR, ICMR, CSIR, DAE, DRDO, and DST.

The Ministry of Finance has estimated a total revenue foregone of Rs. 1,45,000 crore per year due to the implementation of the new tax provisions.

The new tax rates, particularly the 15% income tax rate for new manufacturing companies, are expected to provide a sustainable environment for the manufacturing sector. It aims to balance the revenue foregone while supporting enterprises in the manufacturing industry.