Ministry of Finance has issued a press release dated 20^th September, 2019 in order to make changes in the Income-tax Act 1961 and the Finance (No. 2) Act 2019 vide Taxation Laws (Amendment) Ordinance, 2019.

Proposed key amendments are:

1. A new provision shall be inserted in the Income-tax Act effective from FY 2019-20 to promote growth and investment, allowing any domestic company an option to pay income-tax at the rate of 22%, subject to condition that they will not avail any exemption / incentive. The effective tax rate for these companies shall be 25.17% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.

2. Another new provision shall be inserted in the Income-tax Act effective from FY 2019-20 allowing any new domestic company incorporated on or after 1st day of October 2019 and making fresh investment in manufacturing, an option to pay income-tax at the rate of 15%. This benefit is available to companies which do not avail any exemption/incentive and commences their production on or before 31st March, 2023. The effective tax rate for these companies shall be 17.01% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.

3. 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 of tax. Such companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period and shall be liable to pay tax at the rate of 22% after the exercise of the option and also cannot withdrawn the option subsequently. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5% to 15%.

4. The enhanced surcharge introduced by Finance (No. 2) Act, 2019 shall not apply to the following –

• Capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax, in the hands of an individual, HUF, AOP, BOI and AJP
• Capital gains arising on sale of any security including derivatives, in the hands of Foreign Portfolio Investors (FPIs).

5. Tax shall not be charged on the buy back of shares by the listed companies which have already made a public announcement of buy-back before 5^th day of July 2019.

6. The scope of CSR Fund spending of 2% has been extended to incubators funded by Central or State Government or any agency or Public Sector Undertaking of Central or State Government, and, making contributions to public funded Universities, IITs, National Laboratories and Autonomous Bodies (established under the auspices of ICAR, ICMR, CSIR, DAE, DRDO, DST, Ministry of Electronics and Information Technology) engaged in conducting research in science, technology, engineering and medicine aimed at promoting SDGs.

While these are the highlights, we will share detailed analysis of the Ordinance shortly.

Source: Press Information Bureau (PIB)

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