Introduction of the new bill
The Finance Minister of India Nirmala Sitharaman has recently introduced the Taxation Law (Amendment) Bill. This bill was introduced in the ongoing session of the Lok Sabha on 25.11.2019. The new bill is a replacement for the Taxation Laws (Amendment) Ordinance, 2019, that was issued on 20 September 2019.
Along with this bill, the following bills were also introduced in the Lok Sabha house on the same day:
- International Financial Services Centres Authority Bill, 2019,
- Special Protection Group (Amendment) Bill, 2019,
- The Recycling of Ships Bill, 2019.
Features of the new bill:
Here are the main features of the taxation law (amendment) bill:
- For the domestic companies, the effective rate of tax required to be paid is 25.17%. This rate includes the basic tax rate of 22% plus surcharge @ 10% and cess at the rate of 4%. Earlier, the base rate itself was 30% for the domestic companies. However, the companies should not avail any incentive or deduction under the Income Tax Act. Also, such taxpayers cannot pay tax as per the rate of Minimum Alternate Tax (MAT).
- For domestic manufacturing companies, the effective rate of tax is 17.16%. The basic tax rate is 15% plus surcharge at the rate of 10% and cess at the rate of 4%. However, to avail this benefit, the corporations must satisfy the following conditions:
- Such corporations must have come into existence on or after 1st October 2019.
- The manufacturing process must be started by such companies before 31st March 2023.
- The companies must not claim any incentive or deduction under the Income Tax Act.
- MAT is not applicable to such corporations.
If there are corporations that are not willing to opt for the concessional tax regime or claims exemptions/incentives, then:
- Such companies will be liable to pay tax at the pre amended rates specified as per the earlier law.
- Such companies are provided with an option to adopt this scheme once their exemption/holiday period expires.
- Under the new law, they would be liable to pay tax at the rate of 22%.
- Also, the rate of MAT for these corporations has been reduced from the existing 18.5% to 15%.
- The amended bill also introduces a provision for capital markets. The enhanced surcharge introduced in the Finance Act will not be applicable now.
- The new bill also provides relief to the listed corporations in relation to buy back of shares. Now, the buy back of shares introduced in the Finance Act will not be applicable if the public announcement was made before 5th July 2019.
The amended law will thus help to promote growth and attract fresh investment in manufacturing. It will boost ‘Make in India’ initiative of the Government and will benefit the economy of the country.
