Dear All,
Please do provide your insights on following questions.
What direction do you believe future corporation tax policy should take and why? (eg lowered for small businesses to encourage growth)
Thank you
Corporation Tax_Future direction
Replies (1)
| Here is an analysis of the future direction of corporation tax (corporate income tax) in India: 1. Current Position (as of FY 2021-22 context): - Domestic companies under Section 115BAA: 22% + 10% surcharge + 4% cess = ~25.17% effective rate - New manufacturing companies under Section 115BAB: 15% + 10% surcharge + 4% cess = ~17.01% - Old regime (without opting 115BAA): 30% base + applicable surcharge 2. Global Context: - The OECD Global Minimum Tax (Pillar Two — 15% global minimum corporate tax for MNEs with turnover > EUR 750 million) came into effect from 2024. India has been part of BEPS negotiations - India's 15% rate for new manufacturers aligns with the global minimum — a strategic choice 3. Future Direction: - The trend since 2019 has been toward rate rationalisation and simplification (moving toward a flat 22-25% regime) - Further rate cuts are unlikely in the near term given fiscal consolidation needs and the global minimum tax framework - The focus is shifting toward: (a) broadening the tax base, (b) reducing exemptions and deductions (sunset of Section 115BAB for new investment after specific dates), (c) better compliance through technology (faceless assessments, AIS, TRACES) - India may introduce a Domestic Minimum Top-up Tax (DMTT) to comply with Pillar Two for large MNEs 4. Key Watch Points: Budget announcements for simplification of corporate tax structure, potential introduction of DMTT, and extension/expiry of concessional rate regimes are key indicators to track. |
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