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Big relief for foreign investors, listed firms; govt withdraws enhanced surcharge, buyback tax

Samrat Sharma
finance minister, Nirmala Sitharaman, PSU bank, public sector banks, big bank merger, slowdown, steps to revive economy, slew of measures, GST council

Finance Minister Nirmala Sitharaman announced big relief for capital gains by foreign portfolio investors and buyback tax for listed companies. The Finance Minister said that the enhanced surcharge will not be applicable to capital gains arising on sale of any security, including derivatives in the hands of foreign portfolio investors. In the other announcement for listed companies, she added that in order to provide relief to listed companies which have already made a public announcement of buyback before 5 July 2019, tax on buyback of shares shall not be charged.

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Nirmala Sitharaman also said that any domestic company has an option to pay income tax at 22 per cent, subject to the condition that they will not avail any exemption and incentive. Effective tax rates for these companies will remain 25.17 per cent, inclusive of surcharge and cess. Also, such companies will not be required to pay the minimum alternative tax.

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In order to attract fresh investment in manufacturing, the FM announced a provision that allows any new domestic company incorporated on or after Oct 1, 2019 and making fresh investment in manufacturing to pay the income tax at 15 per cent. If such companies are not availing exemptions and incentives and if they commence their production by March 31, 2023, the effective tax rate of 17.01 per cent will be applicable. Such companies will not be required to pay a minimum alternative tax.

Even the companies which are enjoying exemptions and incentive will get relief in minimum alternative tax. MAT for such companies will be reduced to 15 per cent from 18.5 per cent. Nirmala Sitharaman said that the total revenue forgone for a reduction on corporate tax and other measures announced is Rs 1.45 lakh crore per year.

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In the past few days, the Finance Minister has met the heads and representatives of different industries and sectors and have announced a slew of measures that could provide cushion to the ailing economy. Recently, the FM announced steps to boost exports and housing sectors. Prior to this, she announced big bank mergers to reduce the burden of stressed assets on the PSU banks, liquidity support to the banks and housing finance companies, easing norms of external commercial borrowings, etc. To enhance the ease of doing business in India amid the slowdown, the finance ministry also allowed 100 per cent FDI in various fields, including, contract manufacturing.