The President Ram Nath Kovind cleared the Taxation Laws (Amendment) Ordinance 2019 to give effect to amendments in the Income Tax Act, 1961 and Finance Act, 2019 to bring into effect the slew of corporate tax rate cuts announced on Friday.
The ordinance amends the Income Tax Act 1961, and gives any domestic company an option to pay income tax at the rate of 22% subject to the condition that it will not avail itself of any exemption or incentive.
Hence, the effective tax rate for these companies will be 25.17% inclusive of surcharge and cess. These companies will also not be required to pay Minimum Alternate Tax (MAT).
Under the new provision, a new domestic company incorporated on or after 1 October 2019 making fresh investment in manufacturing and commences their production on or before 31 March, 2023, will have to pay income tax at the rate of only 15%.
It has also expanded the scope of 2% CSR (corporate social responsibility) spending.