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INDIA: Corporate Tax Cut in Bid to Spur Investment and Counter Economic Slowdown

The country’s corporate tax rate has been cut from 30% to 22%, with the change retroactively applying as of 1 April this year, the first day of the current financial year. This will see all domestically-incorporated companies – including subsidiaries of overseas businesses and joint ventures with foreign companies – not currently benefitting from any existing investment incentives or exemptions, pay corporate tax at a rate of 25.17% (after factoring in all other surcharges and levies).

In addition, in a move designed to boost domestic production in line with the government’s Make-in-India initiative, all manufacturing businesses incorporated in the country on or after 1 October 2019 will pay corporate tax at the further reduced rate of 15% (effectively 17.01%). In order to qualify, they must not be in receipt of any other investment incentive and must begin operations prior to 31 March 2023.

In the case of businesses currently enjoying previously-introduced investment benefits or tax holidays, they will be permitted to pay corporate tax at the reduced rate once their current preferential entitlement expires. Furthermore, in the case of businesses currently paying 18.5% Minimum Alternate Tax (MAT), this will be reduced to 15%.

These latest rate cuts follow the government’s recent stimulus package, which was introduced in response to the country’s economic slowdown. It is hoped that these new rate cuts will spur private sector profit growth and encourage domestic investors.

Content provided by Picture: HKTDC Research
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