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New Corporate Income Tax Rates after Taxation Laws (Amendment) Bill, 2019

new-corporate-income-tax-rates-after-taxation-laws-amendment-bill-2019

The Taxation Laws (Amendment) Bill, 2019, which seeks to amend the Income Tax Act 1961 and Finance (No. 2) Act, 2019 has been passed by the Parliament. The bill was passed by the Rajya Sabha on December 5, 2019. The Lok Sabha had passed the bill earlier on December 2. 

The bill will replace the Taxation Laws (Amendment) Ordinance, 2019 promulgated by the President on 20th September 2019 to reduce corporate tax rates. 



    Introduction

    Presently, the corporate tax rates are contained in the Finance (No. 2) Act, 2019 and in Section 115BA of the Income Tax Act, 1961.

    The Bill has introduced to new sections – section 115BAA and section 115BAB and introduced to new corporate tax rates under those sections. These new reduced corporate tax rates are applicable from AY 2020-21 or FY 2019-20 and are applicable to domestic companies only. It is an option given to the domestic companies either to opt for new corporate tax rates or continue with the existing corporate rate of income tax.

    Although the Ordinance was promulgated on 20th September 2019, the new corporate income-tax rates have been made applicable from 1st April 2020 (AY 2020-21).

    The new corporate tax rates can opt only if the specified deductions including addition depreciation is not claimed by the domestic companies.

    A detailed article on the topic can be found here

    This article presents the synopsis of the corporate income tax rates for a domestic company in India for the assessment year 2020-21 (AY 2020-21).

    Corporate income-tax rates for Assessment Year 2020-21

    Table-1
    Category of Taxpayer
    Domestic Company
    Total turnover or gross receipts during the previous year 2017-18 is up to Rs. 400 Crore
    25%
    Other Domestic Companies
    30%
    Domestic companies opting Sec. 115BA
    25%


    Minimum Alternative Tax on Book Profit
    Rate of MAT
    MAT on Book Profit
    15%


    Surcharge on Income-tax for Companies:
    Rate of Surcharge
    Total Income is up to Rs. 1 crore
    Nil
    Total Income is Rs. 1 crore to Rs. 10 crore
    7%
    Total Income exceeds Rs. 10 crore
    12%


    Health & Education Cess on Income-tax and Surcharge for Companies
    In all cases covering   Table-1 above
    Health & Education Cess
    4%
    Marginal Relief on Surcharge
    Where Total Income is Rs. 1 crore to Rs. 10 crore
    Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
    Where Total Income exceeds Rs. 10 crore
    Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore

    Corporate income-tax rates for Assessment Year 2020-21 after the amendment by the Bill

    Table-2
    Category of Taxpayer
    Domestic Company
    Domestic companies opting Sec. 115BAA
    22%


    Minimum Alternative Tax on Book Profit
    Rate of MAT
    MAT on Book Profit
    0 % (Nil)


    Surcharge on Income-tax for Companies:
    Rate of Surcharge
    Surcharge at a flat rate
    10%


    Health & Education Cess on Income-tax and Surcharge for Companies
    In all cases covering   Table-2 above
    Health & Education Cess
    4%
    Marginal Relief on Surcharge and MAT Credit u/s 115JAA
    Not Available

    Table-3
    Category of Taxpayer
    Domestic Company
    Domestic companies opting Sec. 115BAB
    Income from manufacturing activity
    15%
    Other Income (not specified in Chapter-XII)
    22%
    Excess Income from related parties
    30%
    STCG from non-depreciable assets
    22%


    Minimum Alternative Tax on Book Profit
    Rate of MAT
    MAT on Book Profit
    0 % (Nil)


    Surcharge on Income-tax for Companies:
    Rate of Surcharge
    Surcharge at a flat rate
    10%


    Health & Education Cess on Income-tax and Surcharge for Companies
    In all cases covering   Table-2 above
    Health & Education Cess
    4%
    Marginal Relief on Surcharge and MAT Credit u/s 115JAA
    Not Available


    Conclusion

    It may be noted that the New Corporate Income Tax Rates mentioned in Table-2 and Table-3 are optional to a domestic company. If such a company does not opt for reduced New Corporate Income Tax Rates then it may continue to pay as per tax rates specified in Table-1.

    Further, it may be noted that Surcharge on income-tax in Table-2 and Table-3 is applicable without any threshold limit of total income.

    Chart showing Corporate Income Tax Rates after Taxation Laws (Amendment) Bill, 2019 for AY 2020-21

    Domestic Companies
    New tax rates after amendment
    Existing tax rates before amendment and also applicable after amendment
    Total Income
    Companies Opt for section 115BAA
    Companies Opt for section 115BAB
    Companies Opt for section 115BA
    Turnover upto Rs. 400 Crore in FY 2017-18
    Other Companies
    Upto Rs. 1 crore
    25.168%
    17.16%
    26%
    26%
    31.20%
    IT
    22%
    IT
    15%
    IT
    25%
    IT
    25%
    IT
    30%
    SC
    10%
    SC
    10%
    SC
    0%
    SC
    0%
    SC
    0%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Above Rs. 1 crore but less than Rs. 10 crore
    25.168%
    17.16%
    27.82%
    27.82%
    33.384%
    IT
    22%
    IT
    15%
    IT
    25%
    IT
    25%
    IT
    30%
    SC
    10%
    SC
    10%
    SC
    7%
    SC
    7%
    SC
    7%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Above Rs. 10 crore
    25.168%
    17.16%
    29.12%
    29.12%
    34.944%
    IT
    22%
    IT
    15%
    IT
    25%
    IT
    25%
    IT
    30%
    SC
    10%
    SC
    10%
    SC
    12%
    SC
    12%
    SC
    12%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Cess
    4%

    Chart showing Corporate Income Tax Rates for Minimum Alternative Tax (MAT) after Taxation Laws (Amendment) Bill, 2019 for AY 2020-21

    Domestic Companies
    New MAT tax rates after amendment
    Existing MAT tax rates before amendment and also applicable after amendment
    (In case of MAT tax rate remains same irrespective of Turnover)
    Total Income
    Companies Opt for section 115BAA
    Companies Opt for section 115BAB
    Companies Opt for section 115BA
    Turnover upto Rs. 400 Crore in FY 2017-18
    Other Companies
    Upto Rs. 1 crore
    0 %
    0 %
    15.60%
    15.60%
    15.60%
    IT
    0%
    IT
    0%
    IT
    15%
    IT
    15%
    IT
    15%
    SC
    0%
    SC
    0%
    SC
    0%
    SC
    0%
    SC
    0%
    Cess
    0%
    Cess
    0%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Above Rs. 1 crore but less than Rs. 10 crore
    0 %
    0 %
    16.692%
    16.692%
    16.692%
    IT
    0%
    IT
    0%
    IT
    15%
    IT
    15%
    IT
    15%
    SC
    0%
    SC
    0%
    SC
    7%
    SC
    7%
    SC
    7%
    Cess
    0%
    Cess
    0%
    Cess
    4%
    Cess
    4%
    Cess
    4%
    Above Rs. 10 crore
    0 %
    0 %
    17.472%
    17.472%
    17.472%
    IT
    0%
    IT
    0%
    IT
    15%
    IT
    15%
    IT
    15%
    SC
    0%
    SC
    0%
    SC
    12%
    SC
    12%
    SC
    12%
    Cess
    0%
    Cess
    0%
    Cess
    4%
    Cess
    4%
    Cess
    4%

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