Amendments in the Income Tax Act 1961

Subject: Economy

Context:

Minister of State for Finance & Corporate Affairs in response to a question asked in the Lok Sabha said in September 2019, the Government announced several measures to promote growth, investment and create new employment opportunities through the amendments in the Income-tax Act, 1961 and Finance act 2019.

Concept:

Measures taken by Ministry of Finance, which are as follows:

• reduction in the corporate tax rate from 30% to 22% provided the company did not avail any exemption or incentive.
• an option to pay income-tax at the rate of 15% for the new domestic companies incorporated on or after 1st October 2019 and making a fresh investment, subject to their not availing any exemption or incentives and provided they commence production by 31st March 2023.
• reduction in the Minimum Alternate Tax from the existing rate 18.5% to 15% for existing companies that are availing the exemption/incentives.
• In order to provide relief to listed companies which had already made a public announcement of buy-back before 5th July 2019, it was provided that tax on buy-back of shares in case of such companies shall not be charged.
• The amendments expanded the scope of Corporate Social Responsibility (CSR) of 2 per cent spending. The CSR 2% fund can be spent on incubators funded by Central or State Government or any agency or Public Sector Undertaking and making contributions to public-funded Universities, IITs, National Laboratories, and Autonomous Bodies engaged in conducting research in science, technology, engineering and medicine aimed at promoting Sustainable Development Goals.
• Subsequently, structural reforms were announced as part of the AatmaNirbhar Bharat Package (ANBP) which, inter alia, includes change in definition of MSMEs, collateral-free automatic loans for businesses including MSMEs, subordinate debt for stressed MSMEs and equity infusion for MSMEs through Fund of Funds.