Mini-Budget after Budget: Govt slashes corporate tax rates to boost economy, investments

With her maiden budget seemingly failing to address issues facing the economy and doing little to bolster growth that has slowed to a six-year low and check unemployment that has risen to a 45-year high, Sitharaman has over the past one month announced measures in three tranches for different sectors of the economy including automobiles, banks and real estate.

Panaji: The government on Friday slashed the income tax rate for companies by almost 10 percentage points to 25.17 per cent and offered a lower rate to 17.01 per cent for new manufacturing firms to boost economic growth rate from a six-year low by incentivising investments to help create jobs.

Finance Minister Nirmala Sitharaman said the reduction in tax rates has been done by promulgating an ordinance to an amendment to the Income Tax Act.

"In order to promote growth and investment, a new provision has been inserted in the Income Tax Act, with effect from the financial year 2020. It will allow any domestic company an option to pay income tax at 22 per cent subject to the condition that they will not avail any exemption or incentives," she told reporters here.

Also, the super-rich tax introduced in Sitharaman's maiden budget on July 5 by way of a higher surcharge on income, shall not apply on capital gains arising on sale of equity shares in a company or business that is liable to pay securities transaction tax (STT).

The enhanced surcharge shall also not apply to capital gains arising on sale of any security, including derivatives in the hands of foreign portfolio investors, she said.

To provide relief to listed companies which have already made a public announcement of buyback of shares before July 5, 2019, tax on such buyback shall not be charged.

The tax cut will cost the exchequer Rs 1.45 lakh crore annually.

Sitharaman, however, sidestepped questions on the impact the concessions will have on the fiscal deficit target, saying that the government was conscious of the reality and will reconcile numbers.

With her maiden budget seemingly failing to address issues facing the economy and doing little to bolster growth that has slowed to a six-year low and check unemployment that has risen to a 45-year high, Sitharaman has over the past one month announced measures in three tranches for different sectors of the economy including automobiles, banks and real estate.

India's gross domestic product (GDP) growth slowed for the fifth consecutive quarter in April-June 2019 to 5 per cent, the lowest in six years. This was on the back of faltering domestic demand, with both private consumption and investment proving lackluster.

In response, her initial policy measures included support for the automobile sector, reduction in capital gains tax, and additional liquidity support for shadow banks. Accompanying structural reforms included a further easing of the foreign direct investment regime and consolidation of the public banking sector.

In the third part, last Saturday (September 14), she announced a stressed asset fund to finance unfinished real estate projects and measures to boost exports.