Finance Minister Nirmala Sitharaman on September 20 has slashed the effective corporate tax from 30 per cent to 25.17 per cent, inclusive of all cess and surcharges for domestic companies. However, the move, effective from April 1, is subject to the condition that they will not avail any other incentive or exemptions.
In effect, the corporate tax rate will be 22 per cent for domestic companies if they do not avail any incentive or concession. The changes in the Income Tax Act and Finance Act will be made effective through an ordinance.
Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures would be Rs 1.45 lakh crore annually. Companies opting for the 22 per cent income tax slab will now not have to pay the Minimum Alternative Tax (MAT). New domestic manufacturing companies incorporated after October 1 can pay the income tax at the rate of 15 per cent without any incentives, the finance minister said. This means the effective tax rate for new manufacturing companies will be 17.01 per cent, inclusive of all surcharge and cess.
Companies can opt for lower tax rate after the expiry of tax holidays and concessions that they are availing now, she added.
The Central Governments move will have a major positive impact in theinfrastructure sector.
Rudrabhishek Enterprises Limites (REPL).
By slashing down the corporate tax, the finance minister has addressed the long-standing demand of India Inc. and clearly paved the way for the revival of investment in the Indian economy. The infrastructure industry which was until now reeling under huge tax burden will now eye foreign investments but also look forward to the domestic investors. The government’s measure will revitalize the manufacturing sector and hence the ACE industry, as well as the allied industries, will also get a major push. This will further enhance India’s reputation of a competitive market as now it stands at par with other ASEAN countries when it comes to taxation. The fourth consecutive booster shot by the government will trigger the virtuous cycle of investments, growth and higher employment. The tax implication of 15 percent for the newly incorporated local companies will not only act as a major booster for the economy but to the Make in India initiative too. The government of India has been resolute in its approach towards making India a USD 5 trillion economy by 2024.
RBI CUTS REPO FOR THE 5TH TIME
In a move to sustain the growth momentum, the banking regulator, Reserve Bank of India has reduced repo rate by 25 basis points to 5.15 per cent. This is the fifth straight rate cut from the RBI. The announcement
came after the meeting of the Monetary Policy Committee (MPC). After the latest rate revision, in the key lending rates, there will be an overall decline of 135 bps or 1.35 percentage.
Reverse repo was kept unchanged at 4.90 per cent. Repo rate is the rate at which the RBI lends to banks, while reverse repo rate is at which it borrows from banks.
Rohit Kharche, Director, The Baya Company
“The announcement by the monetary policy committee to cut the repo rate by 25 bps to 5.15 per cent for the fifth consecutive time shows the commitment of the government to improve the current state of the economy. We are optimistic that this policy will trickle down to end consumers in order to propel the real estate industry, thus strengthening private consumption and spur further investments”.
Kamal Khetan, Chairman and Managing Director, Sunteck Realty Limited
“The sustained accommodative stance of the RBI is good for growth, especially for the residential real estate sector. Clearly, the benign inflation has given a greater scope for the bank to go for a revival of the economy. We hope that banks will now accelerate the transmission of the RBI rate cuts to the common man to improve the demand and consumption across all sectors. The 5th consecutive rate cut has definitely sent a strong signal for the real estate sector to expect growth in sales at the onset of a busy festive season.
Srinivasan Gopalan, CEO, Ozone Group
“It is a welcome step towards bringing liquidity in the sector considering the current market scenario. The rate cut of 25 bps was expected and we are optimistic that with lending rates coming down marginally, there will be a speedy consumption. We are yet hopeful for further rate cut by RBI in next bi-monthly policy which is need of the hour”
José Braganza, Joint Managing Director, B&F Ventures (P) Ltd.
“The current rate cut announcedis a welcome positive step; a much-needed move during the festive season. This will go a long way to help boost sentiment. It will help increase the consumption amongst potential buyers and help reduce unsold inventories. Additionally, the recent mandate by RBI to link the repo rate with fresh home loans will help in the transmission of the rate cut. We believe that the government will now take measures to help with the housing demand in the country” –