At Rs 1.45K crore, govt`s burden for reducing corporate tax is 33% of FY19-20 defense budget

New Delhi: The Finance Ministry on Friday announced that corporate tax rates will be slashed to 22 percent for domestic companies and 15 percent for new domestic manufacturing companies.

The total revenue foregone for the reduction in corporate tax rate and other relief estimated at Rs 1,45,000 crore. The total estimated expenditure to be born by the government is 33.64 percent of India's total Defense Budget at Rs 4,31,010.79 crore.

“In order to promote growth and investment, a new provision has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22 percent subject to condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17 percent inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax,” an official release said.

For the year 2019-20, the total Defence Budget (including Civil and Pensions) is Rs 4,31,010.79 crore, which is 15.47 percent of total Central Government Expenditure (Rs 27,86,349 crore).  Also, Capital Budget of Ministry of Defence for 2018-19 is approximately 31.97 percent of the total capital expenditure of the Central Government, the Lok Sabha was informed in July 2019.

Defence Expenditure is increasing every year in absolute terms implying higher spending. From 2016-17 to 2019-20, expenditure on Defence has increased by Rs 90,089 crore, the Lower House was told.