ICAI submits Pre-Budget Memoranda-2018

 

The Finance Act, 2015 increased the rate of surcharge levied on domestic companies by 2 per cent. The surcharge at the rate of 7 per cent shall be levied in case of a domestic company if the total income of the domestic company exceeds INR one crore but does not exceed INR ten crore and at the rate of 12 per cent in case total income exceeds INR ten crore.

The Finance Act, 2015 has also increased the surcharge rate from 10 per cent to 12 per cent on DDT. The increase in surcharge by 2 per cent will bring the effective DDT rate to 20.358 per cent as against the present rate of 19.995 per cent. The increased rate of surcharge on tax makes cost of doing business in India significantly high. The increased tax cost will adversely impact the investors’ sentiments and economic growth. Further, the effective tax rate applicable to domestic companies also happens to be one of the highest in the world with a very few countries1 levying a higher tax rate (of 34.6%) for income levels of more than INR 10 crore. DDT is a levy on the company which was earlier levied in the hands of the shareholders. The increased DDT rate (inclusive of surcharge and education cess) creates disparity when compared with the tax rate of dividends received by an Indian company from specified foreign subsidiaries.

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