The Taxation
Laws (Amendment) Bill, 2019 was introduced in Lok Sabha on November 25,2019 and
finally passed on December 2, 2019. This Bill is going to amend the Income
Tax Act 1961 and the Finance (No 2) Act 2019. The
bill seeks to attract more investment in the manufacturing sector by bringing down
corporate tax rates to 22% without incentives and 15% for new manufacturing
entities. Here's the key highlights of the Bill.
Highlights of the Bill
- At present, domestic companies with annual turnover of up to Rs 400 crore pay income tax at the rate of 25% and for other domestic companies tax rate is 30%.
- The Bill provides domestic companies with an option to pay tax at the rate of 22%, provided they do not claim certain deductions under the Income Tax Act.
- The Bill provides new domestic manufacturing companies with an option to pay income tax at the rate of 15%, provided they do not claim certain deductions.
- These new domestic manufacturing companies must be set up and registered after September 30, 2019, and start manufacturing before April 1, 2023.
- The domestic companies have right to opt for the new reduced tax rates in the financial year 2019-20 (i.e. assessment year 2020-21) or in any other financial year in the future.
- Once a company exercises this option, the chosen provision will apply for all subsequent years.
- The provisions regarding payment of Minimum Alternate Tax (MAT) will not apply to companies opting for the new tax rates. .
- The Bill adds that the provisions regarding MAT credit will also not apply to companies opting for the new rates.
- The Ordinance reduces
the MAT rate (applicable for companies not opting for the new tax rates) from
18.5% to 15% with effect from the financial year 2019-20. However the Bill amends this
provision by making it effective from the financial year 2020-21 .
[Click here to Download Original Text of Bill]
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