Either corporate tax rate is likely to be reduced to 27% or surcharge abolished to give 3% relief to companies, sources said.
The statutory rate of taxes on companies stands at about 33.66% with corporate tax of 30% and surcharge of 10% along with education cess of 2%. Corporates are demanding around 5% cut in taxes, but it is not likely to be accepted entirely, sources said adding the cut may be limited to 3% only.
Companies in India are given a host of tax exemptions. These include tax holiday for software technology parks, EoUs, infrastructure service providers and units set up in backward areas. Because of all these exemptions, effective rate of taxation on corporates works out to be much lower.
The government collected close to 50% more corporate tax at Rs 97,315 crore during the first 10 months of this fiscal against Rs 65,094 crore during April-January of the previous fiscal.
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By djain128, Section Taxation - Income Tax
Posted on Wed Feb 21, 2007 at 08:32:25 AM EST
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Thailand has a corporate tax rate of 30% and Philippines 35%, whichis also likely to be lowered to 30% by 2009. Philippines and Thailand, where rates are closer to India -- also offer tax offs for industrial projects. Effective rates there could be lower for some companies.
Most countries across the globe have been reducing corporate tax rates to attract investments. A survey by KPMG in 2006, covering 86 countries, showed that the average corporate tax rate over the last 14 years was cut from 38.1% to 27.1%.
In the Budget 2005-06, FM P Chidambaram had cut corporate tax rate to 30% from earlier 35%, but increased surcharge to 10% from 2.5%.
This reduced the statutory tax rate, including education cess, on corporates to 33.66% from 36.59%.In the Budget 2006-07, he retained this tax structure but raised the Minimum Alternate Taxation to 10% from 7.5% in the previous fiscal.
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