What Experts Say On Government's Big Tax Relief To Companies

The new tax structure is effective from April 1, 2019.
The new tax structure is effective from April 1, 2019.

Finance Minister Nirmala Sitharaman announced a slew of measures on Friday to revive sagging investment in country's economy, including a cut in corporate taxes. Ms Sitharaman said that the effective corporate tax rate will be lowered to 25.2 per cent from 30 per cent, which she said would be at par with Asian peers. The new tax structure is effective from April 1, 2019. This change will be made through an ordinance to amend the Income Tax Act, 1961. The centre will have to bear a cost of Rs. 1.45 lakh crore this fiscal to support its decision to reduce corporate tax, Ms Sitharaman said.

Here's what tax experts say on the corporate tax rate cut: 

Akila Agrawal, Partner & Head - M&A, Cyril Amarchand Mangaldas

"The corporate tax relief announced by the Government will definitely boost the economy and increase capital investments. Increase in capital investments will lead to more job opportunities and growth. Whilst it may take some time for the investments to materialise, it is a step in the right direction. One should also examine how this move impacts government spending."

Amit Maheshwari, Partner of Ashok Maheshwary & Associates LLP

"FM slashes corporate tax rate for domestic companies to 22 per cent, effective corporate tax rate after surcharge to be 25.17 per cent; Buy-back tax not to apply for listed companies, which have already made a public announcement of buy back before July 5, 2019; MAT reduced to 15 per cent for companies who opt to pay surcharge and cess; Companies enjoying tax holiday can avail concessional rate after exemption period."

"Manufacturing companies incorporated after October 2019 and commencing production by March 31, 2023 to pay tax at 15 per cent; Enhanced surcharge not to apply on capital gains on sale of securities including derivatives in the hands of FPIs"