Federation of Indian Chambers of Commerce and Industry (FICCI) has made a recommendation to the government to cut the corporate tax rate to 25% irrespective of turnover.
The chamber has also proposed the government to revise the income tax slabs for individuals by making a 30% rate applicable to those individuals who earn more than Rs. 20 lacs annually.
Businesses today face a high tax cost which in turn raises the cost of production and results in low surplus for reinvestment and expansion. A corporate tax rate of 30% coupled with a dividend distribution tax rate of 20% leaves the effective tax cost of the companies substantially high.
“However, the income level on which the peak rate is applied in other countries is significantly higher. Hence, there is a need for further raising the income level on which the peak tax rate would trigger, to make the same compatible with international standards,” states FICCI, recommending that the income on which the highest rates are applicable should be beyond Rs. 20 lakh.
FICCI has also urged to reduce the Minimum Alternate Tax (MAT) of 18.5%, as this rate is quite high. The MAT rate should ideally be reduced to commensurate with the phasing out of tax exemptions and incentives.
FICCI has further asked for continued weighted deductions in the income tax for various modes of scientific research expenditure, along with deductions for corporate social responsibility expenditure and an increase in the overall deduction limit under section 80C to at least Rs. 3 lakh under the Income Tax Act.
Until then everyone patiently awaits for February 1 to know whether or not these expectations find their way in the Budget 2019.
I am an aspiring Chartered Accountant. I spend most of my free time dredging through the various Indian finance subreddits. I am a semi-professional bowler with a high strike rate every time there is a new tax reform!