On 20 September 2019, the Government of India introduced the Taxation Laws (Amendment) Ordinance, 2019. According to the Ordinance, the government makes certain changes to the Income Tax Act of 1961 and the Finance Act (No 2) of 2019.
The main changes are following:
- From fiscal year 2019-20, the corporate tax rate for domestic companies reduced from 30% to 22%, subject to condition they will not avail any incentive or exemptions. Accordingly, the corporate effective tax rate would be 25.17% including all surcharges and charges. These companies are also not obliged to pay the minimum alternative tax;
- For new manufacturing companies established after 1 October 2019, there is an option to pay a tax of 15%. The effective tax rate for new manufacturing companies is 17.01% including surcharge and tax;
- A company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period. After the exercise of the option they shall be liable to pay tax at the rate of 22% and option once exercised cannot be subsequently withdrawn. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%; and
- For the listed companies that have announced buyback before 5 July 2019, the tax on buyback of shares will not be charged. A higher surcharge will also not apply on capital gains on sale of security including derivatives held by foreign portfolio investors.
