Government introduces taxation amendment bill in Lok Sabha to cut corporate tax for domestic companies and new domestic manufacturing companies

Finance Minister Nirmala Sitharaman on 25th November 2019 has introduced the taxation amendment bill 2019 in Lok Sabha to amend the Income Tax Act and to replace the Ordinance that was used to slash corporate tax rate to stimulate growth rate in a slowing economy.

Key Highlights from the amendment bill

  • A new provision (Section 115BAA) is inserted in the Income Tax Act  to provide that with effect from the current financial year 2019-20, an existing domestic company may opt to pay tax at 22%, plus surcharge at 10% and Cess at 4%, Provided they do not claim any deduction/Incentive.
  • Currently, domestic companies with an annual turnover of up to 400 crore rupees pay income tax at the rate of 25 per cent. For other domestic companies, the tax rate is 30 per cent.
  • Section 115BAB has been inserted which provides new domestic manufacturing companies with an option to pay income tax at the rate of 15 per cent, provided they do not claim certain deductions.
  • 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%.
  • In order to provide relief to listed companies, the buy-back tax on shares of listed companies introduced through the Finance Act will not apply to buy-backs in respect of which public announcement were made before 5th July, 2019.
  • In order to stabilise the flow of funds into the capital market, it was provided that the enhanced surcharge introduced through the Finance Act on capital gains arising on account of transfer of listed equity share or certain units which are liable to securities transaction tax will not apply. Further, it was also provided that the enhanced surcharge will not apply to capital gains income of FPIs arising out of transfer of any security including derivatives, having concessional tax regime.

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