CORPORATE TAX RATE REDUCED TO 22% AND 15% AND OTHER FISCAL RELIEF IN CONNECTION TO CAPITAL GAIN


The Government has made some some certain Amendments in the Income Tax Act 1961 “The Act” and the Finance Act 2019.

1. FOR DOMESTICE COMPANIES -  Anew provision has been inserted in the Income Tax Act with effect from FY 2019-20. Which allows an option to pay income – tax at the rate of 22% . The effective tax rate for these companies shall be 25.17% inclusive of surcharge & cess.
Also , such companies shall not be required to Pay Minimum Alternate Tax (MAT).
            CONDITION
           Domestic Company will not avail any exemption / incentive.
2. NEW DOMESTICE MANUFACTURING COMPANIES(Incorporate on or after 1st October 2019)   Another new provision has been inserted in the Income Tax Act with effect from FY 2019-20 allows an option to pay Income Tax at the rate of 15 % . the effective tax rate for these companies shall be 17 .01% inclusive of surcharge & cess .
Also , such company shall not be required to pay Minimum Alternate Tax (MAT). 
             CONDITION
              Such company will not avail any exemption / incentive and commence their production on or 
              before 31st March 2023 .
3. ENHANCE SURCHARGE ON CAPITAL GAIN SHALL NOT APPLY  -  New provision provide that enhanced surcharge introduced by Finance Act 2019 shall not apply on capital gain arsing on sale of equity share in a company or a unit of equity oriented fund or a unit of a business trust liable for securities transaction tax , in the hand of an individual , HUF, AOP, BOI, and AJP.
4. FOR FOREING PORTFOLIO INVESTORS (FPIs )  -  enhanced surcharge shall not apply to capital gain arising on sale of any security including derivatives , in hand of Foreign Portfolio Investors (FPIs).
5. FOR LISTED COMPANY MADE ANNOUCEMENT OF BUY BACK -  In order to relief listed companies which have already made a public announcement of buy – back before 5th July 2019, it is provided that tax on buy back of shares in case of such companies shall not be charged 

a. 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 . 
b. However , these companies can opt for the concessional tax regime after expiry of of their tax holiday/ exemption period .

c. After the exercise of the option they shall be liable to pay tax at the rate of 22% and once exercised cannot be subsequently withdrawn .
d. Further, in order to provide relief to companies which continue to avail exemptions/ incentive , The Rate of Minimum Alternate Tax (MAT) has been reduced from existing 18.5% to 15% .

Author 
CA Pooja Shukla FCA
RYPS & ASSOCIATES LLP
Website:www.ryps.in
Contact No: 9810505547

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