Reduction in Corporate Tax to Revive Growth; Manufacturing Companies to Benefit the Most

  • The corporate rate has been slashed to 22% if companies choose not avail exemptions and incentives. The effective tax rate would be 25.17% after including all surcharges. Also, these companies would not be required to pay Minimum Alternative Tax (MAT).
  • Push to Make-in-India: Domestic companies incorporated on or after October 1 and are making fresh investments in manufacturing are allowed to pay 15% tax if the exemptions are not availed. The companies must commence production before the end of FY23. In addition, they are not required to pay MAT.
  • Companies seeking exemption and incentives can pay MAT of 15%, which was earlier 18.5%.
  • The sale of equity shares and equity-oriented mutual funds will not attract additional surcharge on capital gains tax for individuals and HUFs. Earlier, individuals earning Rs 2-5 crore and those earning more than Rs 5 crore had to pay a surcharge of 25% and 37%, respectively. Now, this has been revised and a higher rate of surcharge shall not apply on capital gains.
  • Companies now have permission to use 2% CSR spending on incubators funded by IITs, NITs, national laboratories, and autonomous bodies.
  • Tax on share buyback will not be levied for those listed companies that made the announcement before July 5.
  • These new measures will have an impact of Rs 1.45T on government’s exchequer on an annual basis.

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