Income Tax Act 1961 Current Affairs - 2020
On December 2, 2019, Lok Sabha passed the Taxation Laws (Amendment) bill, 2019. The main objective of the bill is to provide an option for the domestic companies to pay taxes at the rate of 22%.
The bill replaced the ordinance promulgated by the President in September 2019. The ordinance reduced corporate taxes. The bill aims to amend both Income Tax Act, 1961 and Finance Act, 2019.
The bill provides the domestic companies to pay taxes at the rate of 22%. However, this can be availed only if the companies are not claiming deductions under the Income Tax act. Currently, the companies with annual turn over of Rs 400 crores are paying taxes at the rate of 25% and the companies with annual turn over more than Rs 400 crores are paying taxes at the rate of 30%.
Concessions are provided to those companies that were started after September 30, 2019 and begins manufacturing before April 1, 2023. They can pay taxes at the rate of 15% provided they do not claim deductions from other laws and rules
The companies opting for the new tax rates need not pay Minimum Alternate Taxes (MAT).
The main aim of the bill is to promote growth and investment in domestic manufacturing sector. In order to pull up the economy of the country the Union Government also reduced the corporate tax rates up to 10%. It was the biggest reduction in the last 28 years.
Tags: Bills and Acts • Bills and Amendements • Economic Growth • Finance Act 2019 • Income Tax Act 1961
The Centre government has cut the effective corporate tax rate for existing domestic companies to 25.17% (from 34.94% now) and for new domestic companies, it will be 15% now. For this purpose the government has brought in Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in Income-tax Act 1961 and Finance (No. 2) Act 2019.
The announcement was in this regard was made by Union Minister for Finance and Corporate Affairs Nirmala Sitharama ahead of 37th GST council meeting to be held in Goa. The new domestic manufacturing companies will have to pay 15% tax.
Existing Domestic Company: A new provision has been added in Income-tax Act with effect from Financial Year 2019-20, which allows any domestic company an option to pay income-tax at rate of 22% if they do not avail any exemption or incentive. Now, the corporate tax rate for domestic companies shall be 25.17% (inclusive of surcharge & cess), which was earlier nearly 35% as well as such companies shall not be required to pay Minimum Alternate Tax (MAT).
New Domestic Company: Under the new provision a new domestic company incorporated on or after 1 October 2019 making fresh investment in manufacturing and commences their production on or before 31 March, 2023, will have to pay income tax at rate of only 15%.
Finance Minister has also announced the government decision to expand the scope of 2% CSR (corporate social responsibility) spending. Fin Min also expressed confidence that the move is well studied whereby industrial growth and investment which is due to increase with this move will compensate revenue forgone for reduction. Also, total revenue foregone for reduction in corporate tax rate and other relief are estimated to be at Rs.1.45 lakh crore.
Tags: Corporate Tax Rate • Domestic Company • Finance (No. 2) Act 2019 • Income Tax Act 1961 • Nirmala Sitharama