15,080 profitable Indian companies paid no tax in 2015-16

Due to various tax incentives, these firms had an effective tax rate of zero

 Due to various tax incentives, these firms had an effective tax rate of zero.jpg

Tax incentives allowed 15,080 profit-making Indian companies to have effective tax rates of zero, and in some cases less than zero, in 2015-16, according to an IndiaSpend analysis of the latest available national tax data or more specifically a government analysis called the Revenue Impact of Tax Incentives under the Central Tax System.

The central government introduced a minimum alternate tax (MAT) in the late 1980s to tackle this anomaly, but even MAT has exemptions that appear to have negated its original intent partially: 52,911 companies made profits in 2014-15 and paid no tax, IndiaSpend reported in March 2016.

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Effective tax rates vary across sectors in 2015-16

The effective tax rates of the lowest paying industries (cement, sugar, financial leasing companies), which were in single digits in 2014-15, have increased substantially and all are touching nearly 20%.

These sectors, however, continue to be taxed at lower rates than other industries.

There are interesting contrasts on tax rates of different industries in the same sector:

1.Banking companies paid tax at 40.3% while share brokers/sub-brokers paid tax at 25.1% (both financial services).

2.Courier agencies paid tax at 41.7% compared to transporters who paid tax at 26.4% (both services).

3.Forest contractors paid tax at 37.6% while mining contractors paid tax at 28.2% (both contractors).

4.Drugs and pharmaceuticals paid tax at 24.2%, electronics paid tax at 35.5% (both manufacturing).

 

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