Relief for Businessmen as Budget Extends 25% Corporate Tax Rate to Firms With Annual Turnover of up to Rs 400 Crore
Earlier, domestic corporations with an annual turnover of up to Rs 250 crore needed to pay 25% towards corporation tax and those with an annual turnover of over Rs 250 crore needed to pay 30% tax.
Image for representation.
New Delhi: In her first Budget speech, Finance Minister Nirmala Sitharaman on Friday extended the corporate tax rate of 25% to all firms with an annual turnover of up to Rs 400 crore, a move that will cover most Indian companies.
“As far as the corporate tax is concerned, we continue with phased reduction in rates. Currently, a lower rate of 25% is only applicable to companies having an annual turnover up to Rs 250 crore. I propose to include all companies having an annual turnover of Rs 400 crore,” Sitharaman said while presenting the Union Budget in the Lok Sabha.
This will cover 99.3% of all the companies, she added.
“My tax proposals will stimulate growth, incentivise affordable housing, and encourage start-ups by releasing entrepreneurial spirit. It will also be geared towards promoting digital economy. I aim to simplify administration and bring greater transparency,” Sitharaman said.
The Companies Act, 2013, governs the corporate sector in India. Every company registered under the Act is liable to pay what is called popularly called corporate tax.
Earlier, domestic corporations with an annual turnover of up to Rs 250 crore needed to pay 25% towards corporation tax and those with an annual turnover of over Rs 250 crore needed to pay 30% tax. Foreign corporations, on the other hand, need to pay a flat 40% corporate tax on their annual turnover.
On the other hand, corporations with a net income of over Rs 10 crore need to pay a 12% surcharge.
Foreign corporations, meanwhile, pay a surcharge of 2% if they earn a net income between Rs 1 crore and Rs 10 crore. If the net income crosses that mark, these corporations need to pay a surcharge of 5%.
In India, there are about eight lakh companies with a total sales figure of up to Rs 250 crore. There are only 7,000 companies across the country that register an annual turnover of over Rs 250 crore. Yet, these large companies pay a lion’s share of the corporate taxes. These companies have sought a reduction in the tax slab for many years.
According to the Income Tax department, 100 firms, which comprise 0.012 % of the eight lakh companies, contribute over 40% of the country’s corporate tax collection.
As is common across the world, the net income or net revenue is calculated after accounting for certain costs like depreciation, selling cost and administrative costs. The net income or net revenue also includes net profits and income received from other sources.
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