Abstract
On 20th December, 2019, the Central Government introduced the Taxation Laws (Amendment) Ordinance, 2019, which created a favourable taxing environment for the Companies. Through this Ordinance, section 115BAB, which covers all sorts of domestic companies, that is, any company formed and registered in India, was introduced in the Income Tax Act which offered a very low tax rate of 15% (17.5% including surcharge and cess) to the new manufacturing companies. This Ordinance also reduced the Tax rate for domestic companies to 22% (25.17% including surcharge and cess). Additionally under the new corporate assessment strategy, new organizations that set up assembling offices in India beginning in October and initiate creation before the finish of March, 2023 will be charged at a viable pace of 17%. This move did cause a rise in the value of the stock in India, but through this paper, we plan to delve deeper into how this new introduction affected the economy of India – ranging from the stock market to the value of rupees against dollar, the idea behind introducing this Ordinance, while also touching upon what is Corporate Tax and the Corporate Tax system that was present before the introduction of section 115BAB.
Highlights
In year 2019, our honourable Finance MinisterSmt Nirmala Sitharaman declared that the government reduced the rate of tax for corporate
Moving forward and comparing the tax rate of corporate in India globally we can conclude from the chart attached below (Fig 1) that, the new corporate tax rates in India is much lower than USA (27%), Japan (30.62%), Brazil (34%), and Germany (30%) and for the new firms the tax rate is similar as of Singapore (17%)
If a company opts to pay their corporate tax under section 115BA, they shall be charged at a tax rate of 25% with a surcharge of 7% or 12%, as the case maybe and a cess of 4%
Summary
Smt Nirmala Sitharaman declared that the government reduced the rate of tax for corporate. As a result to this, automobile sales have been falling, the manufacturing sector is down and our exports are decreasing whereas imports are increasing Seeing this we can conclude that our economy is crashing and the budget of FY 2019-20 increased the rate of surcharges for individual having taxable income from Rs. 2 Crores to 5 Crores and 5 Crores & above. In Fig.[2] we have the pie chart showing the percentage which the corporate tax contributes towards India’s revenue both before and after of this decision With this decision the government is losing 145,000 Crores every year, but this attracted the foreign investments and will help India in the long run. Another important reason behind this decision was that government of India wanted to revive our manufacture sector. This paper will further deal in depth with impact of this reduction in every major sector and whether this decision as turned as a boon or a curse in this pandemic situation
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