Corporate Tax Cut

On 20 September 2019, the finance minister announced a major cut in corporate tax rates from 30% to 22% for existing domestic companies, and to 15% for new manufacturing companies from the earlier 25%. The effective tax rate will be 25.17% and 17.16% for existing and new companies respectively after including surcharge and cess. The lower effective tax rate of 25.17% can only be availed by those companies who give up their tax exemptions and incentives. Existing companies have the option to avail the new lower corporate tax rates without any exemptions or continue with the higher tax rates along with exemptions. Companies who register after 1 October 2019 will pay an effective tax rate of 17.16%, however they will need to start functioning before 31 March 2023 without availing any exemptions. The cess and surcharge do not go to the states and have been kept intact, while the corporate tax has been reduced on the basic rate.

Companies with an annual turnover of up to ₹400 crore and a taxable income up to ₹1 crore will now have to pay 22.9% effective tax as compared to the earlier 26%, while those with taxable income greater than ₹1 crore will now pay 24.5% effective tax as compared to the earlier 27.8%. Companies having an annual turnover of more than ₹400 crore and with taxable income less than ₹1 crore have now to pay 22.9% effective tax as compared to 31.2% previously, while those with annual taxable income between ₹1 crore and ₹100 crore have now to pay 24.5% effective tax as compared to 33.4% earlier; those with annual taxable income greater than ₹100 crore have now to pay 25.17% effective tax vis-à-vis 34.9% previously.