India Cuts Corporate Tax Rate To 25% In Bid To Revive Growth

India's government on Friday slashed corporate taxes in a surprise $20.5 billion break aimed at reviving private investment, seeking to lift growth from a six-year low that has sapped jobs and fuelled discontent in the countryside.

Finance Minister Nirmala Sitharaman told a news conference  that the effective corporate tax rate will be lowered to around 25% from 30%, which she said would be on par with Asian peers, an announcement that triggered a more-than-3% jump in Indian shares.

"With effect from financial year 2019-20 ... any domestic company has an option to pay income tax at the rate of 22%, subject to condition that they will not avail any exemption," the minister said.

The effective tax rate for such companies will be around 25%, inclusive of surcharges, she said. 

The total taxation revenue loss due to the measure would be 1.45 trillion Indian rupees ($20.5 billion), Sitharaman said, raising concerns that the government may not be able to meet its fiscal deficit target of 3.3% for 2019-20 at a time when tax revenue collections are already weak.

That concern was felt on bond markets, which saw yields rise to a near three-month high on speculation that the government may have to borrow more to meet its expenditure needs for the year.

(Reuters)