India to Reduce Corporate Income Tax Rate to 25 Percent

Posted by Reading Time: 3 minutes

India’s Finance Minister, Arun Jaitley, has announced a reduction in corporate tax rates from 30 percent to 25 percent. The lower rate, designed to attract Foreign Direct Investment (FDI), places the Indian rate at the same level of China and is expected to be active from the fiscal year 2016-17. This means it will take effect from April 1 2016.

Related Link Icon-IBRELATED: India’s FY 2015-16 Budget: Meaning and Implications for Foreign Investment

The phasing in of the new rate has yet to be announced; however, Jaitley stated “the reduction in corporate tax rate will boost investor confidence and encourage companies to continue the process of job creation and overall growth.”

The move brings India into closer pricing competition with China, especially given that Indian labor costs remain on average 20 percent of that in China. Offset by this, however, are productivity levels, and detailed examinations need to be undertaken prior to examining financial and production capabilities between the two countries to fully understand the overall investment risk and reward. Generally speaking, however, if Indian labor can reach within 65 percent of China’s productivity ratios, India tends to become the more viable option.

Related Link Icon-IBRELATED: Getting Growth Into Asia – The India Option

Rohit Kapur, Country Manager for Dezan Shira & Associates in India, said “We will have to wait and see when this is actually implemented, as the impact on Indian MNC’s as the Government are reducing tax on one hand yet discontinuing incentives on the other may meet resistance. However, it is expected to be beneficial to foreign investors as the ability for them to reach a lower effective tax rate is likely to be enhanced by this move”.  

About Us

Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email india@dezshira.com or visit www.dezshira.com.

Stay up to date with the latest business and investment trends in Asia by subscribing to our complimentary update service featuring news, commentary and regulatory insight.

Related Reading-IB

Cover 90 x 126

Managing Your Accounting and Bookkeeping in India
In this issue of India Briefing Magazine, we spotlight three issues that financial management teams for India should monitor. Firstly, we examine the new Indian Accounting Standards (Ind-AS) system, which is expected to be a boon for foreign companies in India. We then highlight common filing dates for most companies with operations in India, and lastly examine procedures and regulations for remitting profits from India.

Tax, Accounting, and Audit in India 2014-2015
Tax, Accounting, and Audit in India 2014-2015 offers a comprehensive overview of the major taxes foreign investors are likely to encounter when establishing or operating a business in India. This concise, detailed, yet pragmatic guide is ideal for CFOs, compliance officers and heads of accounting who need to be able to navigate the complex tax and accounting landscape in India in order to effectively manage and strategically plan their India-based operations.

An Introduction to India’s Audit Process
In this issue of India Briefing Magazine, we provide readers with an overview of India’s annual audit process and offer important tips for the smooth navigation of the country’s audit regulations and accounting standards. We begin by first explaining the two most common types of audit in India, statutory and internal audits, and then outline the standard steps and procedures an Indian auditor will follow in each.

1 thought on “India to Reduce Corporate Income Tax Rate to 25 Percent

    I’m really inspired together with your writing abilities and also with the
    layout for your blog. Is that this a paid topic or did
    yyou cusomize it yourself? Anyway keep up tthe excellent high quality writing, it’s rare to peer a great
    weblog like this one nowadays..

Leave a Reply

Your email address will not be published. Required fields are marked *