Finance Minister Nirmala Sitharaman gave a big relief to domestic corporate and foreign portfolio investors on Friday. After this relief, there is an atmosphere of ‘Diwali’ in the stock market on Friday. Investors in the stock market were happy with corporate tax cuts and capital gains tax surcharge, making 5 lakh crores within an hour. According to data from Bombay Stock Exchange (BSE), soon after the announcement of the Finance Minister, the market started climbing and in a short time the market capitalization reached 143.45 lakh crore as against 138.54 lakh crore on Thursday. That is, after the announcement of the Finance Minister, the stock market grew by about 5 lakh crores. The BSE Sensex is making new records. The Sensex saw a rise of more than 1800 points a day earlier about 10 years ago, while the Nifty 50 also crossed the 11,250 mark by adding more than 500 points, the first intraday high in 10 years. Experts say that the announcement will affect the Nifty earnings per share. Experts said, “Banking, FMCG, consumer durables and auto companies will benefit the most. Manufacturing sector will be more attractive because of 15 percent tax. A reduction in corporate tax has been announced at a time when trade war is going on in the world.
To boost the flow of funds in the capital market, the Finance Minister said that the surcharge raised in the budget will not be paid on the proceeds from the sale of equity shares. This exemption will also cover foreign portfolio investors who trade in derivatives. The Finance Minister said that after the deduction, adding cess and surcharge will bring the effective corporate tax rate to 25.75 per cent from 30 per cent earlier. Apart from this, minimum alternative tax has also been cut. These announcements of tax cuts will cost the exchequer 1.45 lakh crore.
Experts said the government’s move would boost investment in the economy and present India as an attractive destination for business. He said that the government has announced a tax of 15 percent for new companies and has laid a red carpet for them. The move will boost billions of dollars of foreign investment.
Rupee rises 66 paise after announcement by Finance Minister
After the announcement by Finance Minister Nirmala Sitharaman to accelerate economic growth and investment, the rupee jumped 66 paise to 70.68 per dollar during trading. The Finance Minister announced on Friday the reduction of corporate tax rates, including relief to foreign portfolio investors (FPIs). The budget tax on the income from the sale of securities including derivatives on FPIs was withdrawn. Also, the effective rate of corporate tax for domestic companies was reduced by about 10 percent to 25.17 percent. After these announcements, the rupee gained 66 paise to reach 70.68 per dollar. The rupee had closed at Rs 71.34 per dollar on Thursday. After the announcement, the Sensex also jumped 1,886 points at around 1.26 minutes.
Investors in the stock market were happy with corporate tax cuts and capital gains tax surcharge, making 5 lakh crores within an hour.
Highlights of the announcements of the Finance Minister
A new provision has been made in the Income Tax Act, which will be effective from the financial year 2019-20. After this, the domestic company will get the option to pay income tax at the rate of 22 percent. However, the condition will be that they are not going to take advantage of any incentive.
The effective rate for these companies including cess and surcharge will be 25.17 percent. Also, such companies will not have to pay minimum alternative tax. Another new provision has been made in the Income Tax Act to attract new investment in the manufacturing sector and to promote Make in India. This will give any company formed on or after October 1, 2019, the option to pay income tax at the rate of 15 percent on investing in manufacturing. This benefit will be given only to those companies which will not take any other incentives or discounts and will start operations before 31 March 2023. The effective tax rate including surplus and cess for these companies will be 17.01 percent. Also, there will be no need to give minimum alternative tax to these companies.
Listed companies have also been given relief. Under this, listed companies which have announced repurchase of shares before July 5, will not have to pay tax for that. The government has also expanded the scope of CSR. Companies are now getting two per cent amount under Corporate Social Responsibility (CSR) finance from the government doing research in incubation (cradle center), science, technology, engineering or medicine funded by the central or state government or any agency or public PSUs. Schemes falling under cherished universities, IITs, national laboratories and institutions like DRDO, ICAR Expenditure has also been exempted from the public bodies … These announcements are expected to affect the exchequer by Rs 1,45,000 crore.