Existing corporate tax structure very reasonable: revenue protection

“Our country’s current corporate tax rate of 22 percent, compared to the economy of our size, is very, very reasonable. In light of all this, it was felt that this was the date on which the sunset would occur and should set,” Malhotra said.

The existing corporate tax structure at 22 percent is “very reasonable” compared to an economy of India’s size and therefore the concessional tax regime in place for four years for new manufacturing units was not extended beyond March 2024. This is what Finance Minister Sanjay Malhotra said.

In an interview with PTI, Malhotra said that the interim budget 2024-25 provides continuity in the tax system and the benefits given to taxpayers in the past few years are yielding results in the form of a huge revival in personal income tax.

“Taxpayer services have been a major focus of the government and will continue to be so in the future. Taxpayer services include rationalization, simplification and confidence-based taxation with less scrutiny and more accurate assessments and use of technology. We have hopeful that taxpayer services will continue to improve helps us in compliance and improves tax collection efficiency,” said Malhotra.

To a question as to why the concessional corporate tax regime was not extended beyond March 31, 2024, Malhotra said the scheme was introduced in 2019 and companies were given a lot of time to set up new units to benefit from the 15 percent concessional rate. tax.

“A long period of four years was given. This is the time it took a major company from concept, planning and fundraising to the ground. Sufficient time was given to extend it for another year to March 31, 2024, due to Covid These investments have a long gestation period.

“Our country’s existing corporate tax rate of 22 percent, compared to the economy of our size, is very, very reasonable. In light of all this, it was felt that this was the date when it would disappear and it should sunset,” Malhotra said.

The government announced in 2019 that any new domestic company established on or after October 1, 2019 and making new investments in manufacturing will have the option to pay income tax at a rate of 15 percent if they cease their production on or before arc 31 have begun. , 2023. In the budget presented on February 1, 2023, the date was extended to March 31, 2024.

“The new manufacturing companies that can commence operations before March 31, 2024, will continue to enjoy that benefit,” Malhotra added.

In September 2019, the government announced a reduction in basic corporate tax for then-existing companies from 30 percent to 22 percent; and for new production companies established after October 1, 2019, from 25 percent to 15 percent.

Companies that opted for these new tax rates had to forego all exemptions and incentives. The effective tax rate for existing units, after taking into account surcharges and taxes – such as Swachh Bharat tax and education tax, which are levied on top of income and corporate tax rates – is 25.17 percent, compared to 34.94 percent earlier.

In the interim budget, the government has announced withdrawal of outstanding small tax demands, some of which date back to 1962, of up to Rs 25,000 till 2014-15 relating to income, wealth and gift taxes. There are around 1.11 crore such disputed demand submissions and the total tax demand stands at Rs 3,500-3,600 crore.

“This is not in the nature of disputes, but more of uncoordinated tax demands and some of them are very old. They will help in better tax administration,” he said.

First print: February 4, 2024 | 4:04 PM IST