India an Attractive Investment Destination after Slashing of Corporate Tax Rates
By Bhavesh Jindal, Ashwani & Associates, Chartered Accountants
The history of the highest corporate tax rates in India goes back to 1997, with an effective corporate tax rate of 38.05%. However, in recent times, there has been a progressive shift in this trend, wherein India is becoming a more preferred nation for investment, bolstering investor sentiment by way of various regulatory and tax reforms. The central government, basing their optimistic approach on the main theme of “Made in India” as a means of nation building, has introduced a new tax regime, slashing the corporate tax rates in India by 8%, from the prevailing 30% to 22%. Even further, for a newly set up manufacturing company incorporated on or after 01 October 2019, the tax rates have been reduced to as low as 15%.
The newly incorporated tax rates (if opted) come with an added reward of non-applicability of Minimum Alternate Tax (MAT) amongst others, but at the cost of relinquishment of various exemptions or deductions like tax holidays or accelerated depreciation, already provided under the old regime of Indian Income Tax. The desirability and feasibility of migrating to the new scheme by forgoing the benefits of all incentives needs thorough evaluation based on facts and circumstances.
In the recent Economic Budget for 2020–2021, various proposals put forth, like eradication of corporate dividend tax, reduction in individual tax rates, reduction of withholding tax on specified interest income of non-residents, expanding the scope of business trusts, etc., are all driven by the government’s move towards becoming a USD 5 trillion economy by 2025 and enticing huge foreign investments.
The new rate is a benchmark set by the Indian Government for times to come, an increase wherefrom shall seek justification, thus confirming the stability of these rates for a long time.
Bhavesh JindalGGI member firm
Ashwani & Associates, Chartered Accountants
Advisory, Auditing and Accounting, Corporate Finance, Tax
T:+91 98554 004280
Ashwani & Associates is an audit, tax and consulting firm in India with three offices. Their clients range from emerging entities to large corporations with billions of dollars in revenue. They include privately held businesses, not-for-profit organisations and publicly traded companies. Ashwani & Associates supports a local, national and international client base.
Bhavesh Jindal is a qualified Chartered Accountant and Law Graduate, who focuses on quality service. His work areas include various direct tax matters including tax litigation, assistance in representation before the Income Tax Settlement Commission, corporate consultancy and tax advisory including cross border transactions and analysing transfer pricing impacts and various tax regulatory compliances.
Published: International Taxation Newsletter, No. 12, Spring 2020 l Photo: Dmitry Rukhlenko - stock.adobe.com