In a move aimed at attracting foreign capital, the Indian government announced a reduction in the corporate tax rate for foreign companies from 40% to 35%. This proposal was unveiled by Finance Minister Nirmala Sitharaman during her Budget speech, where she emphasized the necessity to entice foreign investments for the country’s development needs.
The pre-budget Economic Survey also advocated for seeking foreign direct investments (FDI) from Beijing to bolster local manufacturing and tap into the export market, despite strained relations with China. With the US and Europe diversifying their sourcing away from China, the survey suggested that attracting Chinese companies to invest in India and subsequently export products to these markets would be more effective than direct imports from the neighboring country.
The unexpected reduction in the tax rate for foreign companies was met with surprise, as indicated by Deloitte India Partner Rohinton Sidhwa, who mentioned that the abolished 2% equalisation levy would be replaced with alternative levies in preparation for implementing Pillar 1 and 2 obligations.
This budget marks a significant milestone for Sitharaman, who presented her seventh consecutive budget, surpassing the record previously held by the late Moraji Desai. Desai, who served as the finance minister between 1959 and 1964, presented five annual budgets and one interim budget, ultimately setting the record for the most number of budgets presented at 10.
The much-anticipated full budget for 2024-25, the first under the Modi 3.0 government, was unveiled during this session. Sitharaman had previously presented an interim budget in February, addressing the financial needs during the intervening period until the formation of the government after the Lok Sabha polls.
Sitharaman, set to turn 65 next month, made history in 2019 by becoming India’s first full-time woman finance minister during Prime Minister Narendra Modi’s decisive second term. Since then, she has tirelessly presented six consecutive budgets, including an interim budget earlier this year.
The budget session of Parliament commenced on July 22 and is scheduled to conclude on August 12, marking a crucial period for the deliberation and implementation of the proposed fiscal measures.
This bold step to reduce the corporate tax rate for foreign companies reflects India’s proactive approach to economic reform and its commitment to creating an attractive investment climate for global players.
This article provides an in-depth overview of the recent reduction in India’s corporate tax rate for foreign companies, emphasizing the government’s push to attract foreign capital and bolster economic growth. The content touches upon key reactions and historical significance, providing a comprehensive perspective on the announcement.
