The incentivised tax rate of 17 percent for companies incorporated after October 1, 2019, will boost India's hardware industry, said the IT industry body NASSCOM in a statement.
Finance Minister Nirmala Sitharaman on September 19 announced a cut in the corporate tax rate along with a provision that allows new local companies incorporated on or after October 1, 2019, a lower tax rate of 15 percent.
In a media address to announce the rate cut, Sitharaman said: “In order to attract fresh investment in manufacturing and thereby provide boost to ‘Make-in-India’ initiative of the government, another new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any new domestic company incorporated on or after October 1, 2019 making fresh investment in manufacturing, an option to pay income-tax at the rate of 15 percent.”
This benefit will be available to companies that do not avail any exemption/incentive and commences their production on or before March 31, 2023. “The effective tax rate for these companies shall be 17.01 percent inclusive of surcharge and cess,” she added.
According to NASSCOM, the incentivised tax rate of 17 percent will spur investment in the growing hardware sector.
Going by recent reports by NASSCOM, the hardware industry, which includes chip and semiconductors, is estimated to be about $15 billion by 2019 and is one of the fastest-growing in the country. Though the exports are small accounts, the potential is huge, the report stated.
There are reports of Google expanding chip design team in Bengaluru for its gChips unit. Though the field is still nascent it is seeing investments from tech giants in India for chip design. Other firms that are investing include HTC, Samsung and Microsoft HoloLens.
NASSCOM said the rate cut along with the recent export rebate announced in place of MEIS scheme is a great incentive to the manufacturing units. “This is a clear testament of a collaborative effort from the industry and the government to improve opportunities for all sectors to achieve the $5 trillion economy mark by 2024,” the industry body added.
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