ChemOtech Fabcon Pvt Ltd.

FOR COMPANY ASSESSEE

1. The rate of tax for domestic companies is to be reduced from 43% (inclusive of surcharge) to 35%. The surcharge of 7.5% at present is abolished.
2. The rate of tax for foreign companies is to be reduced from 55% to 48%.
3. The rate of tax on royalty or fees for technical services receivable by a foreign company is to be reduced from 30% to 20% in respect of agreement made after 31st May, 1997.
4. The domestic company which declare, distribute and pay dividend after 31st May, 1997 would be liable to pay a flat rate of 10% of such dividends as additional tax U/S 115-O.
   • Such tax is to be paid within 14 days from the date of declaration of dividend. Failure to pay such tax shall attract simple interest @ 2% for every month or part thereof, beside liability for penalty and prosecution.
   • Deemed dividend U/S 2(22)(e) would continue to be taxable as dividend in the hands of receipient.
5. Deduction U/S 80M in respect of inter-corporate dividend is to be discontinued.
6. A company, engaged in manufacture or production of specified items, which incures a capital expenditure (excluding Land & Building) on approved in-house scientific research and development facility, will be eligible for a weighted deduction at 125% of such expenditure. No deduction would be available under any other section in respect of such expenditure.
   • Due to withdrawal of surcharge of corporate tax, the effective tax rate under MAT (Minimum Alternative Tax) on companies would be reduced from 12.9% to 10.5% on the adjusted book profits. Export profits that are eligible for deduction U/S 80 HHC are now, not within the purview of MAT with effect from A.Y. 1998-99.
   • It is important to note that such exemption from MAT is not granted in case of profit of hotels earning foreign exchange or software exports which get deduction U/S 80 HHD and 80 HHE respectively.
7. Proposed sec. 115JJAA provide for carry forward of MAT for set off during the subsequent five assessment years. The scheme pre- scribed is as under:-
   • When a company pays tax under MAT, the tax credit earned by it shall be an amount which is the difference between the amount payable under MAT and the tax payable on the basis of normal computation of total income.
   • Such tax credit will be allowed to be carried forward for being set off for a period of 5 years.
   • In the subsequent assessment year when tax becomes payable on the basis of normal computation of income, the difference between such tax and MAT for the year will be set off against the earlier MAT credit available.
   • The credit allowed will not bear any interest. The proposed scheme is effective from A.Y. 1997-98. ie, from the first year of MAT.

• Back
• OTHER THAN COMPANY ASSESSEE
• FOR BOTH THE ASSESSEE