BackSMEs to pay 25% tax even if Rs50 crore limit crossed in FY17: CBDT
CBDT chairman Sushil Chandra says the income tax department will come out with a clarification on which companies would be eligible to avail the tax benefit
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New Delhi: The income tax department on Monday said companies that had a turnover of less than Rs50 crore in 2015-16 will pay tax at the reduced rate of 25% from 1 April even if they cross the threshold in 2016-17 or subsequent years.
Central Board of Direct Taxes (CBDT) chairman Sushil Chandra said the income tax department will come out with a clarification on which companies would be eligible to avail the tax benefit.
In order to boost the SME sector, finance minister Arun Jaitley in budget 2017-18 reduced the income tax for smaller companies with annual turnover up to Rs50 crore to 25% as against the usual rate of 30%. “If your turnover in 2015-16 was Rs50 crore then you will be subject to 25% tax. We will come out with clarification on (applicability of the tax benefit to) new companies," Chandra said.
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According to the memorandum to the Finance Bill 2017, in case of domestic company, the rate of income-tax shall be 25% of the total income if the total turnover or gross receipts in the previous year, 2015-16, did not exceed Rs50 crore.
Concerns have been raised whether a company having breached turnover threshold of Rs50 crore in 2016-17 or 2017-18 would be entitled to concessional tax rate of 25%. A finance ministry official said that those companies that had total income of less than Rs50 crore in 2015-16 can continue to avail the tax benefit even if the turnover has been breached in subsequent years.
However, clarity is still awaited on whether the tax benefit would accrue to the new companies which set up business in 2016-17 or in 2017-18. As per data of Assessment Year 2015-16, there are 6.94 lakh companies filing returns of which 6.67 lakh companies have a turnover of less than Rs50 crore and, therefore, percentage-wise 96% of companies will get this benefit of lower taxation.
“This (decision) will make our MSME sector more competitive as compared to large companies. The revenue forgone estimate for this measure is expected to be Rs7,200 crore per annum," Jaitley had said earlier.
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