Direct Tax Measures Announced By The Government

In a significant development, the Indian Finance Minister introduced few sweeping investor friendly tax amendments to the Income-tax Act, 1961. Effective from FY 2019-20, these include:

1. Corporate tax rate for all Indian companies reduced from an effective rate of 35.94% to a significantly lower effective tax rate of 25.17% (as long as no tax exemptions/ holidays/ deductions are availed, even if available, such as those under section 10AA, section 35AD, Chapter VI-A etc.). On a base rate comparison of companies not availing any tax deductions/ holidays/ deductions today, this would result in a post Dividend Distribution Tax (“DDT”) investor return of around 62% from 53%.
2. Corporate tax rate for new-Indian manufacturing companies (provided they do not avail of any tax deductions/ exemptions/ holidays) reduced from an effective rate of 35.94% to 17.16%. On a base rate comparison of companies not availing any tax deductions/ holidays/ deductions today, this