In order to boost the Make in India initiative and also to promote growth and investment, the government on Friday slashed corporate tax rate to 22% from 30% for domestic companies, and 15% for new domestic manufacturing companies.
Announcing the major reduction, Finance Minister Nirmala Sitharaman said the government has brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance Act 2019.
Another new provision has been inserted in the Income Tax Act with effect from FY 2019-20 which allows any new domestic company incorporated on or after October 1, 2019, making fresh investment in manufacturing, an option to pay income-tax at the rate of 15%.
The above benefit is available to companies which did not avail any exemption/incentive and commences their production on or before March 31, 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge and cess.
Commenting about the reduction of Corporate Tax, Srikanth Iyer, CEO and Founder of HomeLane.com said, “The strategic decision by our Government towards significant reduction in corporate tax rate for domestic companies from 30% to 25.17%, inclusive of all cess and surcharges is a thoughtful measure to support and enthuse business entrepreneurs regardless of the sectors or sizes.”
Additionally, the income tax at the rate of 15% without any incentives is a delightful step to encourage business investors that will help them to take decisions confidently while operating in a dynamic economy, Iyer added.
The government has also decided to expand the scope of CSR 2% spending. Now CSR 2% fund can be spent on incubators funded by Central or State Government or any agency or Public Sector Undertaking of Central or State Government, and, making contributions to public funded Universities, IITs, National Laboratories and Autonomous Bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.
The total revenue foregone for the reduction in corporate tax rate and other relief estimated at Rs 1,45,000 crore.
Anuj Puri, Chairman of ANAROCK Property Consultants welcomed the bold step of the government. “This big-bang move will have a rippling impact on all sectors including real estate as it will encourage foreign institutional investors to invest in the country. In terms of taxation, India will now be at par with many of its Asian peers and hence a major draw for foreign investors who shied away from entering India due to high taxes.”
The Indian stock exchange was quick to welcome the move and went on a surge within just an hour. The Sensex saw gain of more than 1,800 points while Nifty jumped over 500 points. This is the highest intra-day gain in a decade, giving investors a gain of Rs 5,00,000 crore.
“The chain of announcements made by the Finance Minister in recent past weeks in addressing the growing concerns of various sectors of the economy will go a long way in not just bolstering all-round sentiments but also see its positive ripple impact across all sectors including the real estate. As and when the overall financial health of the economy improves with these slew of measures, there will be heightened activity within real estate – by both actual home buyers and investors alike,” he said.