The Hindu Business Line : Corporate tax rate for domestic firms slashed to 30 pc

THE Finance Minister, Mr P. Chidamabaram, brought cheer to corporate India by aligning the corporate income-tax rate for domestic companies to the highest marginal personal income-tax rate of 30 per cent. A surcharge of 10 per cent would, however, be applicable on domestic companies.

The basic rate of corporate income-tax for domestic companies was hitherto pegged at 35 per cent. No change has now been proposed in the Union Budget for 2005-06 on the tax regime for foreign companies under Income-Tax Act.

Since corporate income-tax rate, the surcharge thereon, and depreciation are inter-linked, the Government has now pegged the rate of depreciation for general machinery and plant at 15 per cent. The initial depreciation rate has, however, been increased to 20 per cent.

In his Budget speech, the Finance Minister said that the corporate sector would find the proposed tax structure as "fair", as it would encourage new investment and ensure equity among all sections of corporate taxpayers.

Corporates paying minimum alternate tax would also gain from the Union Budget for 2005-06, as they can now claim credit under Section 115JB of the Income-Tax Act.

To encourage technological upgradation, the Finance Bill also proposes to reduce the withholding tax on technical services from 20 per cent to 10 per cent.

Mr Chidambaram also announced the removal of requirement of 10 per cent increase in installed capacity for availing of the benefit of initial depreciation.

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