Finance Minister Arun Jaitley in Budget 2017 has proposed a cut in corporate tax rate for MSMEs (Micro Small and Medium Enterprises) having revenues less than Rs 50 crore to 25 percent, adding that about 96 percent of MSMEs will benefit from this move.
In last year’s budget, Finance Minister Arun Jaitley had pointed out that the 30 per cent corporate tax regime in India exceeds other developing economies, thus hampering the domestic industry due to lack of investments.
Most Asian economies have a corporate tax rate below 25 per cent, which is ideal for spurring growth in the domestic sector. The reduction of corporate taxes will be an important factor in drawing investments even though if it calls for lower tax incentives. The complex tax structure in India makes the task tedious for companies flourish and indirectly create more jobs.
Currently, a flat rate of 30 percent corporate tax is levied on the income earned by a domestic corporate. A surcharge of 5 percent is levied in case the turnover of a company is more than Rs 1 crore for a specific financial year.
There are 32 incentives applicable on corporate profits before calculating tax. While the statutory tax rate of 33.99 percent, including cesses and surcharges, companies are paying an effective tax rate of 24.67 percent after factoring in incentives, exemptions and tax deductions.
