India Proposes To Cut Corporate Tax Rate For SME To 25%

; posted on
February 1st, 2018

Arun Jaitley, Finance Minister of India, proposed in the 2018 budget that the corporate tax rate for resident enterprises should to be decreased from to 25%, but only companies with annual turnover no more than Rs250 crore (around 31.3million euros) may apply for this policy. Thus, the measure will benefit small and medium sized companies the most, rather than the large ones.

A Simplified Tax System

Current Income Tax Act was designed in 1960, over half a century to today. The Premier Narendra Modi indicated last September that the old tax system should be amended, which is complex and administratively burdensome due to multi-layers of exemptions and deductions. Alongside a lower rate for most of the enterprises’ taxpayers, the complicated exemptions are to be phased out, so the tax scheme could be effectively simplified.

Tax-Cutting Roadmap

Under the existing tax scheme, the general income tax rate for resident enterprises is 30% plus a surcharge of 7% or 12% based on the net income level of the taxpayer and a 2% education cess. Last year, the tax rate for companies with annual turnover less than Rs50 crore was reduced to 25%, with the government giving up revenue of Rs 7200 crore. By increasing the threshold to Rs250 crore, the new measure will cover 99% of the enterprise filing tax returns and the government will quit revenue of Rs7000 crore. This is in accordance with the tax-cutting roadmap proposed by Jaitley in the 2015-16 budget.

Sources: Moneycontrol, India Today

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