The Union Finance Minister Nirmala Sitharaman presented the full – budget 2024 today before the parliament at 11 am. She unveiled a proposal to reduce the corporate tax rate on foreign companies from the current 40% to 35%, aiming to boost foreign investment. This strategic decision is expected to enhance the attractiveness of the country as a global investment destination and stimulate economic growth.
Foreign companies operating businesses in India are currently subject to a 40% corporate tax rate. However, the total tax liability is higher due to additional levies. A surcharge of 2% is imposed on taxable income exceeding Rs. 1 crore but not exceeding Rs. 10 crore, and 5% for income above Rs. 10 crore. In addition, there’s a 4% health and education cess added to the income tax and surcharge amounts.
Consequently, the effective tax rate for foreign companies with income between Rs. 10 million and Rs. 100 million is 42.432%, while those earning over Rs. 100 million face a 43.68% effective tax rate.
Income earned by foreign companies that is subject to Indian taxation includes income received, accrued, or arising within the country. Additionally, income deemed to be received, accrued, or arising in India is also taxable.
In addition to the reduction in corporate tax rates, the Finance Minister announced several key changes to the tax structure under the new tax regime. The standard deduction for salaried employees has been increased to Rs. 75,000 from Rs. 50,000. This revision is expected to result in a tax saving of Rs. 17,500 for salaried individuals. Similarly, the deduction for family pension for pensioners has been enhanced from Rs.15,000 to Rs. 25,000, providing relief to approximately 4 crore salaried and pensioner individuals.
The budget also addressed changes in the securities transaction tax ( STT ). The STT on Futures Contracts is set to be increased to 0.2%, while the STT on Options Contracts will rise to 0.1%. Additionally, income received on the buyback of shares will now be taxed in the hands of the recipient, adding another layer of tax policy adjustment aimed at balancing the fiscal landscape.
The proposed tax reduction is expected to complement other ongoing economic reforms and initiatives aimed at improving the ease of doing business in India. These include measures to simplify regulatory frameworks, enhance infrastructure, and promote digitalization.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
