Taxation Laws (Amendment) Ordinance 2019

Corporate tax rates slashed to 22 percent for domestic companies and 15 percent for new manufacturing companies

The Government has introduced some amendments in Taxation Laws Ordinance 2019 to make certain changes in the Income-tax Act 1961 and the Finance (No. 2) Act 2019. It was announced during the Press Conference in Goa today by Smt Nirmala Sitaraman (the Union Minister for Finance & Corporate Affairs). The Finance Minister also elaborated on some of the salient features of these amendments further, which are mentioned below:- 

1. To promote growth and investment, a new provision with effect from FY 2019-20 has been inserted in the Income-tax Act which allows any of the domestic companies to pay income-tax at the rate of 22 percent subject to the condition that they will not avail any exemption. The tax rate for such companies will be 25.17 percent which includes surcharge & cess. Along with it, these types of companies are not required to pay Minimum Alternate Tax.

2. To attract new investors in manufacturing and provide a boost to ‘Make-in-India’ initiative of the Government, a new provision has been inserted in the Income-tax Act with effect from financial year 2019-20 which allows any of the new domestic company to make fresh investment in manufacturing which is incorporated on or after 1st October 2019, along with that there is an option to pay income-tax at the rate of 15 percent

3. The companies which do not avail of any exemption can get these benefits and the one who commences their production on or before 31st March 2023. 17.01 percent inclusive of surcharge & cess will be the effective tax rate for these companies.  Along with it, these types of companies are not required to pay Minimum Alternate Tax.

3. A company that does not opt for the concessional tax regime and the one which avails the tax exemption is allowed to pay tax at the pre-amended rate. These companies can also opt for the concessional tax regime after the expiry of their tax exemption period. One they utilize this option, they will be liable to pay a tax rate of 22 percent and one option is used, it cannot be used again. Hereafter, the companies that continue to avail exemptions, the rate of Minimum Alternate Tax has been reduced from 18.5 percent to 15 percent

4. To stabilise the flow of funds in the capital market, it is provided that enhanced surcharge introduced by the Finance (No.2) Act, 2019 shall not apply on capital gains which will be arising on the sale of equity shares in a company, a unit of an equity-oriented fund or unit of a business trust liable for securities transaction tax, in the hands of an individual, which includes HUF, AOP, BOI and AJP. 

5. The amended additional charges shall also not apply to capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).  

6. The listed companies that have already made a public announcement of buy-back before 5th July 2019, tax on buy-back of shares of such companies shall not be charged. 

7. Along with that, the Government has also decided that the scope of CSR 2 spending will be expanded. The fund of CSR 2 percent can be now spent on incubators funded by Central or State Government or any of the agency or Public Sector Undertaking of Central or State Government, and making contributions to public-funded Universities, IITs, National Laboratories and Autonomous Bodies (established under the auspices  of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs. 

8. Rs. 1,45,000 crore is estimated as the total revenue for the reduction in corporate tax rate and other relief.