SANJAY THAPA
FM Nirmala Sitaraman’s decision to bring down corporate tax in India for domestic companies is expected to give a big impetus to the corporate before the festival season sets in. The move no doubt has raised the animal spirit in the corporate sphere as is indicative of the spurt in Sensex by 1921.15 points and Nifty crossed 11250 on Friday – posting the biggest one day gains in a decade!. But will it rejig the market demand ahead of the festive season?
The announcements come three months after the Union budget in July and in conjunction with a slew of measures like merger of banks, capital infusion in the real estate, export incentives and loan melas to push credit by the Finance Minister earlier is expected to revive the economy. Corporate are optimistic the these reliefs along with reduction in interest rates by the 35 basis point cut by the RBI in its last credit policy is expected to push consumption demand in the in the coming festive season. As per economists, the RBI is expected to further slash interest rates by 100 basis points in the coming monetary policy given the inflation rate which is under control till now..
Corporate tax has been brought down to 22 per cent for domestic companies not availing other exemptions which effectively brings it at par with US, China, Japan, Germany and Canada. New companies will have to just shell out 15 per cent as corporate tax.Effectively after adding the surcharges the tax rates would be 25.17 per cent and 17 per cent. She has also done away with special surcharge on capital gains as was announced in the budget — on companies selling securities also the super rich tax on sale of securities by FPIs. Another incentive is listed companies listed which have announced buyback of shares before July 5 will be given exemption from super rich tax. which have announced buyback of shares This is expected to give a big stimulus to the ailing corporate sector even as it means a stimulus to the foreign investment inflows.
On the hindsight, the revenue forgone through these exemptions and reliefs is projected to stand at Rs 1.45 lakh crore annually, this would mean that the 3.3 per cent fiscal deficit target will go into a tailspin.and is likely to end closer towards 4 per cent.
