Union Finance Minister, Nirmala Sitharaman, makes a major announcement!
The effective corporate tax on existing companies has been slashed to 22 per cent and on new companies to 15 per cent – a decision that will not only help boost the investment, but also create employment opportunities in the Indian economy.
There’s something more!
The minister also announced that the now 2 per cent fund of CSR can be spent on incubators funded by Central or State Government or any agency or Public Sector Undertaking of Central or State Government, and, on making contributions to public funded Universities, IITs, National Laboratories and Autonomous Bodies engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs. The Indian textile and apparel industry has welcomed these decisions that benefit them.
The new provision gives new domestic companies incorporated on or after 1 October 2019 an option to pay income tax at the rate of 15 per cent on fresh investment.
The benefit will be available to the companies that do not opt any exemption/incentive and commence their production on or before 31 March 2023.
The effective tax rate for these companies shall be 17.01 per cent inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).
T. Rajkumar, Chairman, CITI,applauded the measures as a welcome step in the right direction at an opportune time.
Prabhu Damodaran, Convenor, Indian Texpreneurs Federation (ITF), Coimbatore said, “Any structural changes like this is the best way to show Government seriousness regarding the economic reforms. Large textile companies should attempt to create mega apparel manufacturing eco system to capitalise the trade war opportunity.”
The companies which do not opt for the concessional tax regime and avail the tax exemption/incentive shall continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/ exemption period.
The existing companies opting for 22 per cent income tax slab won’t have to pay MAT and the effective rate for such companies will be 25.17 per cent including surcharges, cess. That in order to provide relief to companies which continue to avail exemptions/incentives, the rate of MAT has been reduced from existing 18.5 per cent to 15 per cent.
“The steps announced today would give a big push to ‘Make In India’ initiative of the Government and attract fresh investment in the manufacturing sector thereby generating huge employment opportunities in the manufacturing sector,” said T. Rajkumar.