During a media briefing in the Indian state of Goa, Sitharaman said the effective corporate tax rate would be uniformed at 25.75% from 30% and scrapped the minimum alternative tax for domestic companies.
“With effect from financial year 2019-20 ... any domestic company has an option to pay income tax at the rate of 22%, subject to condition that they will not avail any exemption", the minister said, adding the effective tax rate for such companies will be around 25%, inclusive of surcharges.
To attract fresh investment in manufacturing and thereby provide a boost to the "Make-in-India" initiative, new Indian companies set up after October 2019 will have to pay tax at a 15 percent rate, the minister added.
With this tax relief, the minister said the government will lose around $20.5 billion in taxes in 2019-2020.
To stabilise the flow of funds into the market, the minister also said an enhanced surcharge that was announced for the 2019 budget will not apply on capital gains arising from the sale of any security, including derivatives by Foreign Portfolio Investors (FPI).
“The reduction in corporate tax rate will augur well for our economy", India's apex bank RBI chief Shaktikanta Das said at a conference in Mumbai.
Together with earlier announcements, CII expects this to truly revive the ‘animal spirits’ of the industry and create the spark for igniting economic activity sooner rather than later. ~ Chandrajit Banerjee, DG, CII @nsitharaman @nsitharamanoffc @FinMinIndia @PIB_India @PTI_News— Confederation of Indian Industry (@FollowCII) September 20, 2019
This is the third major announcement in last two weeks to revive private investment and arrest economic downturn. The Indian economy has remained sluggish, with GDP growth being the slowest in over six years in the face of a sharp deceleration in consumer demand and lukewarm investment.