FM Nirmala Sitharaman promises cut in corporate income tax to 25%

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Updated: August 20, 2019 11:18:25 AM

As part of this drive, she visited Ahmedabad on August 16 and is planning to go to Varanasi next.  The Budget lowered the tax rate to 25% for all companies having an annual turnover of up to Rs 400 crore, instead of Rs 250 crore earlier.

Corporate tax, FM, Nirmala Sitharaman, economy news, Narendra Modi, tax cutThe finance minister promised all possible help to entrepreneurs, days after Prime Minister Narendra Modi called them the “wealth of the nation” and stressed on their role in nation-building.

On a day when the direct tax code task force submitted its report with the government, finance minister Nirmala Sitharaman said on Monday the government would trim the corporate tax rate gradually to 25% for all companies, including the large ones with an annual turnover of over Rs 400 crore. She, however, didn’t give a time frame for this move. The government has, over the last five years, trimmed the rate to 25% from 30% in a phased manner for 99.3% of companies. However, the 0.7% large companies that don’t enjoy this benefit make up for almost 80% of the total corporate tax collection and are subject to as much as a 30% tax.

Sitharaman also promised all possible help to “wealth creators”, days after Prime Minister Narendra Modi called “wealth creators” the “wealth of the nation” and stressed their indispensability in nation building.  While Modi’s statement on “wealth creators” was to reassure corporate India at a time when several complaints of overreach by taxmen had roiled India Inc, Sitharaman has already lined up plans to tour various cities to hold meetings with the industry and change the perception of “tax terrorism”.

As part of this drive, she visited Ahmedabad on August 16 and is planning to go to Varanasi next.  The Budget lowered the tax rate to 25% for all companies having an annual turnover of up to Rs 400 crore, instead of Rs 250 crore earlier.

If the government walks the talk, as these statements seek to signal, it would mark a decisive shift in its intention to take calculated risks to reverse an economic slowdown, after it shied away from some key reforms in its first term purportedly for fears of the Opposition’s “suit-boot ki sarkar” jibe. These statements also come at a time when buzz about a relief to the foreign portfolio investors from the increase in the super-rich surcharge, which has spooked the stock markets, is gaining momentum.

As per the Budget announcement, with the surcharge on categories of taxpayers with income above Rs 5 crore rising by 22 percentage points, long-term capital gains tax on FPIs using the trust structure would now be 14.25%, against 12% earlier, while short-term gains would rise to 21.4% from 17.9%.

Earlier this month, Sitharaman had said she would travel around the country to gather feedback through first-hand account of any tax-related harassment of companies. She had also promised to review the new corporate social responsibility rules that provide for a jail term up to three years for non-compliance.

Modi had on August 15 said: “We should not view wealth creators with suspicion nor should we look down upon them. If there is no wealth creation, there won’t be wealth distribution….For me, those who create creation are also the wealth of this nation.”

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