Corporate Tax Collections : Highlights
Corporate tax collections exceeded 3% of the GDP after a gap of two years in 2021-22.
- It is reflecting overall improvement in profitability of India Inc propelled by an increase in demand for goods and services.
- In actual terms, the net corporate tax collection in 2021-22 stood at Rs 7.12 lakh crore.
- The Gross Domestic Product (GDP) at the current market price was Rs 236.64 lakh crore.
- The percentage of net corporate tax to GDP worked out to be 3.01%.
- In 2019-20, government cut corporate tax rates for new manufacturing units by almost 10% points as it looked to pep up investments.
- The rate of Minimum Alternate Tax (MAT) too had been reduced to 15 % from 18.5 % in 2019.
- The Minimum Alternate Tax is a strategy designed to close the income tax loophole for all businesses. The MAT makes sure that no business, even one with strong financial standing and significant revenue, may escape paying income tax, even after claiming exemptions.
- The tax cut was reflected in the realization of corporate taxes in 2019-20, when collections fell to over Rs 5.56 lakh crore (2.77% of GDP).
- Corporation tax is payable by both public and private companies registered in India under the Companies Act 1956.
- Corporation tax is a direct tax placed on a company’s net income or profit from its operations.
- The tax is imposed on the net profits of the corporation, which is calculated by subtracting allowable expenses such as the cost of goods sold, operating expenses, and depreciation from the corporation’s total revenue.