The Indian government has cut the corporate tax rate to 22% from 30% for domestic companies in a move to help stimulate the economy.
The net profits of listed Indian companies are expected to rise as high as 25% for the remainder of the financial year.
This latest move is expected to boost investment and lead to companies coming to India to set up shop. New firms will now be taxed at 15% leading to an influx of new businesses.
“This rate cut is expected to cost India some $20 billion in collected revenue.”
Of this corporate tax cut, India’s Prime Minister Narendra Modi said: “ This is historic. It will give a great stimulus to ‘Made in India,’ attract private investment from across the globe…create more jobs.
“The announcements in the last few weeks clearly demonstrate that our government is leaving no stone unturned to make India a better place to do business, improve opportunities for all sections of society and increase prosperity to make India a $5 trillion economy.”
Rating agency, Moody’s was bullish on the rate cut move declaring, “ The government of India’s ( Baa2stable) decision to reduce base corporate tax to 22% from 30% will boost net income of Indian corporates and is credit positive.”
The Indian government will now place a 25.2 % tax on corporate profits rather than what prevailed before which was 34.9%.
This will now give a boost to India’s stock market, the Nifty. At 5% GDP growth, India’s progress is at a six-year low and this announcement may help to lift it out of the doldrums.
This rate cut is expected to cost India some $20 billion in collected revenue.