In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.
Making the announcement, Finance Minister Nirmala Sitharaman said the new tax rate will be applicable from the current fiscal which began on April 1.
Sitharaman said the revenue foregone on reduction in corporate tax and other relief measures will be Rs 1.45 lakh crore annually.
This, she said is being done to promote investment and growth.
In effect, the corporate tax rate will be 22 per cent for domestic companies, if they do not avail any incentive or concession.
The changes in the Income Tax Act and Finance Act will be made effective through an ordinance.
The minister also said companies opting for 22 per cent income tax slab would not have to pay minimum alternative tax (MAT).
Sitharaman further said, new domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without any incentives.
Meaning, effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess.
Sitharaman further said companies can opt for lower tax rate after expiry of tax holidays and concessions that they are availing now.