Govt announces stimulus at an annual cost of Rs 1.45 lakh crore
In a mega boost to the economy, the union government on Friday reduced the corporate tax to 25% inclusive of all cess and surcharge for domestic companies.
Announcing the market stimulus, finance minister Nirmala Sitharaman said the new tax rate will be applicable in the current fiscal beginning April 1, 2019. The relief measures will cost the government Rs 1.45 lakh crore every year. The union government said the ordinance regarding the tax rate cut has already been passed.
Markets responded with a massive soar. BSE market capitalisation surged to 143.45 lakh crore compared to Rs 138.54 lakh crore on Thursday, as the BSE Sensex soared 1,800 points, and the NSE barometer Nifty50 jumped 500 points.
Key announcements made by FM Sitharaman in a press conference –
- Manufacturing companies set up after October 1 to get an option to pay 15% tax. The effective tax rate for new manufacturing firms to be 17.01% inclusive of surcharge & tax.
- New provision made in the income tax act with effect from the fiscal year 2019-20, that allows any domestic company to pay income tax at the rate of 22% subject to the condition they will not avail any incentive or exemptions.
- Listed companies that have announced buyback before July 5, 2019, tax on buyback of shares will not be charged
- A higher surcharge will also not apply on capital gains on the sale of security including derivatives held by FPIs
- An enhanced surcharge will not apply to capital gains arising on equity sale or equity-oriented funds liable to STT stabilise the flow of funds into capital markets
- To provide relief to companies availing of concessions and benefits, a MAT relief by reducing it from 18% to 15%
- CSR 2% spending to include government, PSU incubators and public-funded education entities, IITs
- New domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 % without any incentives.
- The effective tax rate for new manufacturing companies will be 17.01% inclusive of all surcharge and cess.
- Companies which have announced a buyback of shares prior to July 5, will not be charged with super-rich tax.