Praising Finance Minister Nirmala Sitharaman's announcement of rationalisation of corporate tax for domestic companies, Prime Minister Narendra Modi said on Friday that the step would help attract private investments from across the globe besides creating jobs.
Describing the decision as "historic", the Prime Minister tweeted: "The step to cut corporate tax is historic. It will give a great stimulus to #MakeInIndia, attract private investment from across the globe, improve competitiveness of our private sector, create more jobs and result in a win-win for 130 crore Indians."
In another tweet, Modi said that the recent announcements show the government's efforts to ease the business environment in India.
"The announcements in the last few weeks clearly demonstrate that our government is leaving no stone unturned to make India a better place to do business, improve opportunities for all sections of society and increase prosperity to make India a $5 trillion economy," he said.
In her first budget presentation in July, Sitharaman announced the government's target of making India a $5 trillion economy by the year 2024-25.
The most significant decision among the slew of measures announced on Friday was the corporate tax cut for domestic companies. Sitharaman announced a lowering of corporate tax rate on domestic companies to 22 per cent subject to such entity not availing any exemptions and incentives. Also these companies will also not be required to pay any Minimum Alternate Tax (MAT). Effective tax rate in this case would be 25.17 per cent, including cess and surcharge.
The minister announced an even lower 15 per cent corporate tax rate for new domestic companies making fresh investment in manufacturing. These companies should have commenced production on or before March 31, 2023 and would also get exemption from MAT.
Sitharaman said that the Taxation Laws (Amendment) Ordinance 2019 has already been prised to effect changes in the Income Tax Act and Finance Act 2019.
In another decision aimed at ensuring flow of funds in the capital market, the enhanced surcharge provided in Finance Act 2019 shall not apply to capital gains arising on sale of equity shares in a company or a unit of equity oriented business trust, she said.
The enhanced surcharge shall also not apply on capital gains arising on sale of any securities, including derivatives in the hands of Foreign Portfolio Investors (FPIs).
Further, to provide relief to listed companies which have already made a public announcement of buyback before July 5, 2019, it is provided that tax on buyback of shares in case of such companies shall not be charged.
In the past few weeks, the Finance Minister has announced a number of measures to boost consumer demand, increase liquidity in the economy.