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