The government has proposed to reduce the super tax by 1% per year from financial year 2018-19 for both banking and non-banking companies.
Super tax was imposed in 2015 for rehabilitation of internally displaced persons. It was continued in 2016 & 2017. Various organizations have demanded its abolition to reduce the effective tax rate.
It is currently being charged @ 4% on banking companies & 3% on non-banking companies having income greater than Rs. 500 million.
Corporate Tax Proposed to Reduced to 25%
In consonance with the policy to reduce tax rates for individuals and AOPs, the Government has decided to likewise reduce corporate tax rates from 30% in tax year 2018 to 25% in tax year 2023. The corporate tax rate will be 29% in tax year 2019 and will be reduced by 1% each year up to tax year 2023.
Reduction in Tax Rate of Undistributed Profits
Tax on undistributed profits is charged @ 7.5% on accounting profit if at least 40% of after-tax profits are not distributed within 6 months of the end of the year. Various professional bodies have insisted on relaxing the requirements to facilitate businesses in retaining earnings for investments. Therefore it is proposed that tax may be reduced from 7.5% to 5% and the condition of distributing 40% after-tax profits may be reduced to 20%.
Reduction in Tax Rate on REIT Dividends
In order to promote Real Estate Investment Trust, the rate of tax on dividends issued to the unit holders by REIT is proposed to be reduced from 12.5% to 7.5%.
