News:Finance Minister has introduced the Taxation Laws (Amendment) Bill, 2019 in the Lok Sabha.
Key features of the bill:
- Currently, domestic companies with an annual turnover of up to Rs 400 crore pay income tax at the rate of 25%.For other domestic companies, the tax rate is 30%.
- The bill provides domestic companies with an option to pay tax at the rate of 22% plus surcharge at 10% and cess at 4% provided they do not claim certain deductions under the Income Tax Act.They would also not be subjected to Minimum Alternate Tax(MAT).
- These include deductions for: (a) newly established units in Special Economic Zones (b) expenditure on scientific research and skill development projects (c) investment in new machinery/ plant in notified backward areas (d) depreciation of new machinery/ plant and (e) various other provisions.
- The bill also provides for new domestic manufacturing companies with an option to pay income tax at the rate of 15% plus surcharge and Cess provided manufacturing unit must be incorporated on or before October,2019 and must start production by March,2023.
- Further,the bill also specifies that the provisions regarding payment of Minimum Alternate Tax(MAT) will not apply to companies opting for the new tax rates.
- However,a company which does not opt for the concessional tax regime and avails the tax exemption/incentive shall continue to pay tax at the pre-amended rate.
- MAT stands for Minimum Alternative Tax.It was introduced by the Finance Act,1987 with effect from assessment year 1988-89.Later on,it was withdrawn and then reintroduced in 1996.
- The objective of introduction of MAT is to bring into the tax net zero tax companies who in spite of having earned substantial book profits(the profit shown in the profit and loss account) do not pay tax due to various tax concessions and incentives provided under the Income-tax Law.
About Cess and surcharge:
- A cess is a tax that is levied by the government to raise funds for a specific purpose.
- On the other hand,Surcharge is an additional charge or tax levied on an existing tax.Unlike cess,which is meant to raise revenue for a temporary need,surcharge is usually permanent in nature.