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Budget 2018
Feb 02, 2018 09:41 AM IST | Source: Moneycontrol.com

Budget 2018 Impact: Corporate tax relief for the SME sector

Companies with a turnover of less than Rs 250 crore in FY17 would be required to pay tax at 25 percent (and not at the erstwhile rate of 30 percent) in FY19.

Krishna Karwa @krishnakarwa152

Finance Minister Arun Jaitley in his Budget speech announced a major change in corporate taxation rules. Though the amendment will be particularly beneficial for the micro, small, and medium scale enterprises (MSMEs), it does not offer any relief for big companies.

What is the new provision?

Companies with a turnover of less than Rs 250 crore in FY17 would be required to pay tax at 25 percent (and not at the erstwhile rate of 30 percent) in FY19.

Expected impact?

Out of 4,721 Indian listed companies that reported their numbers for the year ended March 31, 2017, 963 companies (20.3 percent of the total) could be major gainers.

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The median tax rate for the above companies is approximately 34 percent for FY17. Consequently, the difference in tax rate (to the tune of 9 percent) is expected to improve their profit after tax margins, thus leading to better earnings visibility.

For more research articles, visit our Moneycontrol Research Page.

India Union Budget 2018: What does Finance Minister Arun Jaitley have up his sleeve? Click here for live Budget 2018 news, views and analyses.
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