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In an attempt to revive the spirit of the Indian economy amidst the continuing economic slowdown, the Indian Government introduces a slew of measures through the Ordinance.

  • Slashes corporate tax rates for domestic companies to 22% (15% in case of new manufacturing companies). Provides for a uniform surcharge rate of 10%.
  • Rolls back the enhanced surcharge on capital gains tax (i) payable by all classes of investors on transfer of listed equity shares (including listed units of an equity oriented fund and listed units of a business trust); and (ii) payable by FPIs on transfer of all securities, including derivatives.
  • Lowers the threshold for the applicability of MAT and the rate of tax in case of MAT from 18 ½ % to 15%. Ousts the applicability of MAT in case of companies which opt for taxability under section 115BAA /BAB.
  • Withdraws buy-back tax in respect of listed shares for which the announcement was made prior to July 5, 2019.

In an attempt to boost foreign investments and revive the spirit of the Indian economy amidst the continuing economic slowdown, the Indian Government recently introduced a slew of measures through the Taxation Laws (Amendment) Ordinance, 2019 ("Ordinance").

The Ordinance comes as a follow up of all the direct tax related announcements that the Finance Minister ("FM") has been making over the last few weeks. The biggest change that has been brought about by the Ordinance is the reduction in the corporate tax rate of domestic companies to 22% (15% for new manufacturing companies). The change has been welcomed and is in fact the need of the hour since an economic slowdown is currently gripping India 1. There is a marked decrease in economic activity and employment resulting in decrease in consumption, decrease in investment, liquidity crunch etc. The reduction in corporate tax rate is likely to result in higher profits being distributed to individual stakeholders thereby increasing their disposable income followed by increase in demand and consumption. The reduction in the rate should provide an impetus to foreign investors to invest into India.

The other changes include the rollback of the enhanced surcharge which was introduced earlier this year by the budget, reduction in the Minimum Alternate Tax ("MAT") rate from 18.5% to 15%, withdrawal of buy-back tax on certain listed shares. Each of the measures introduced under the Ordinance are discussed below:

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