In a big boost to India Inc and what could turn into a game-changer for the country, FM Nirmala Sitharaman has proposed to slash corporate tax for domestic companies and new domestic manufacturing companies. Centre has cut effective corporate tax rate to 25.17 per cent! This includes all surcharges and cesses for corporates. In her press briefing in Goa ahead of the GST Council meeting, Finance Minister Nirmala Sitharaman had yet another gift for coprorates! She said the new tax rate will be made effective from current fiscal - April 1. Significantly, ordinance has already been passed by Modi government putting into effect these tax cuts.

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Sitharaman announced that Modi government has rolled in virtually a new tax regime with these cuts in basic corporate tax rates. The cut has been even bigger for the new manufacturing companies. To give manufacturing sector a boost, government said that the new manufacturing companies set up after October 1 can pay tax at the rate of 15%. The effective tax rate would be 17.01% (including surcharge and tax). This massive Diwali gift will lead the government to forego revenue of as much as Rs 1.45 lakh cr. The reason behind this huge Diwali gift for coprorates is to boost ecponomic growth which had fallen to a new low of 5% in June quarter.

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Over the month, government has provided separate packages for housing sector as well as for exports too.

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Check top power points FM Sitharaman made:

1. In order to promote growth and investment, new provision has been inserted in IT Act, w.e.f FY 2020; it will allow any domestic company an option to pay income tax at 22%, subject to condition that they will not avail any exemption or incentives.

2. Effective tax rate for these companies will be 25.17%, inclusive of all surcharges and cess; further, MAT will not be applicable on them. In short,  A domestic company can pay income tax at 22% if they dont seek any exemption or incentives. Effective Tax Rate 25.17% inclusive of all surcharges and cess for such domestic companies. Such companies also not required to pay Minimum Alternative Tax

3. To attract fresh investment in manufacturing and boost #MakeInIndia, new provision inserted in IT Act, which allows any new domestic company incorporated on or after Oct 1, 2019, making fresh investment in manufacturing, an option to pay income tax at 15%.

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4. A company which does not opt for concessional tax regime and avails tax exemption or incentives shall continue to pay tax at pre-amended rate; these companies can opt for concessional tax regime after expiry of tax holiday or exemption.

5. Any new domestic company incorporated on or after 1st Oct 2019 making fresh investment in manufacturing has an option to pay tax at 15% if not seeking incentives and commence production before 31st Mar 2023.

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6. Enhanced surcharge introduced by Finance (No. 2) Act 2019 shall not apply on capital gains arising on sale of equity share in a company/unit of equity oriented fund or unit of business trust liable for securities transaction tax. Enhanced surcharge shall not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors.

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7. To provide relief to companies which continue to avail exemptions and incentives, rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%.

8. Relief to listed companies which have already made a public announcement of buy-back before 5th July 2019, No tax on buy-back of shares in case of such companies.

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9. Enhanced surcharge under Finance (No.2) Act, 2019 not to 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 STT.

10. To provide relief to listed companies which have already made a public announcement of buyback before July 5, 2019, tax on buyback of shares in case of such companies shall not be charged.

11. Govt. has decided to expand the scope of 2% spending on CSR; this can now be spent on incubators funded by central/state governments, or any agency or PSU of central/state govt, and making contribution to publicly funded universities.

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12. Total revenue foregone for the reduction in corporate tax rate and other relief: 1 lakh 45 thousand crores rupees per year.