Corporate Tax Reduced From 30% to 25% & MAT Carried Forward By 15 Years
Post-demonetization days that coincided with the pre-budget days saw plenty of speculations concerning the type of tax reliefs and the incentives that the government would announce to boost its image among the people. The reduction of the Corporate Tax from 30% to 25% for companies with less than 50 crores revenue per year and a corresponding withdrawal of the exemptions for the next four years seem to be the top incentive towards the process. It is reported that the Corporate Tax accounted for less than a fifth, that is, 19% of the total tax receipts during the last fiscal year.
The major expected impacts of the sop seem to be the higher collection of the overall revenue from the industries. It is also likely to attract more investors to the country whose IT sector is set to be seriously affected by the new Trump policies announcing curbs on the H1B visas. The lowered corporate tax would mean more investments, more jobs opportunities and thus more revenues mopped up by the government all contributing towards a better growth rate. It was always felt that the corporate tax that India levied was among the highest in the developing countries.
The MAT advantage
Minimum Alternate Tax or MAT can be carried forward for the next 15 years as against the 10 years previously. This has come against the strong proposals that the tax is abolished altogether with the government stating that it is not the favorable time to do so. There were also expectations of the 18.5% tax to get some deductions, but that was not to be. The carry forward extension period has been seen as a welcome move by the industries as it will enable the companies to offset the future tax liabilities when the profit-linked investments are phased out.