New Delhi: Finance Minister Nirmala Sitharaman on Friday said that the government has decided to lower corporate tax rate on domestic companies and new manufacturing firms, a move that is expected to boost the sluggish economy.
After the announcement, markets immediately rose with Sensex surging over 1000 points and Nifty climbing above 11,067 mark. It went over 2,100 points later.
In a press briefing in Goa, Sitharaman said the new effective tax rate will be reduced from 30 per cent to 25.2 per cent, which includes all surcharges and applicable on those companies that aren't availing any incentives.
This change will be made through an ordinance to amend the Income Tax Act, 1961, she said.
"In order to promote growth and investment, a new provision has been inserted in the Income Tax Act with effect from fiscal year 2019-20," she said. She said that any advance tax paid will be adjusted.
She said that total revenue foregone for reduction in corporate tax rate is estimated at Rs 1.45 lakh crore per year. She further said that super-rich tax will not to apply on capital gains arising from sale of any security, including derivatives in hands of foreign portfolio investments (FPIs).
The measures are in addition to a series of steps announced by the government to boost demand and investments as economic growth slowed to a six-year low of 5 per cent in the quarter ended June.
The announcement comes amid demand for rate cut, keeping in mind the revenue position and the need to boost sagging economic growth.