Nifty 50 and Sensex jumped nearly 5% at 11,236 making fresh 7-week highs, in biggest one-day gains in ten years after India's Finance Minister Nirmala Sitharaman announced a cut to corporate tax rates for domestic companies to 22%.
In another relief, the minister said listed companies which have announced buyback of shares prior to July 5, will not be charged with super rich tax.
India's Finance Minister Nirmala Sitharaman, centre, and the Reserve Bank of India (RBI) Governor Shaktikanta Das arrive to attend the RBI's central board meeting in New Delhi.
"High tax-paying companies like Maruti Suzuki, HDFC Bank are just zooming".
"Such a rate cut will boost corporate bottomline, facilitate a reduction in product prices".
Foreign investors have been exempted from the additional surcharge imposed in the latest budget. "This move could also materially lead to India effectively integrating with the global supply chain and a boost to Make in India campaign", he added.
"India still has a non-performing loan swamp to drain, but this is most definitely a step in the right direction", he said.
The effective corporate tax rate for companies will be around 25 per cent, inclusive of surcharges, she said.
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"India Inc. looks forward to a roller coaster festive season tax bonanza to ride the tide of positive sentiments".
The Finance Minister further said, "to boost "Make in India", another insertion inserted to Income Tax Act with effect from 2019-20, which allows any new domestic company incorporated on or after 1st Oct 2019 making fresh investment in manufacturing will have an option to pay the income tax at the rate of 15%".
The move is aimed at providing a better boost to the slowing economy.
"Markets gave complete thumbs up to the decision as it is expected to give much room for corporate India to reinvest the money into building capacity and fuel growth for the long term while providing immediate support to its waning earnings in the near term", said Narendra Solanki, Head Fundamental Research (Investment Services) - AVP Equity Research, Anand Rathi Shares & Stock Brokers.
Firms have an option to pay income tax at 22% if they give up exemptions or incentives.
It might be mentioned that lower corporate tax of 22 per cent will apply to those companies which choose not to take any other exemption or incentives.
Taxes will be further lowered to 15% for companies created on or after Oct 1 and that invest in manufacturing, as long as their production begins on or before March 31, 2023.
Mumbai: Domestic equity benchmark BSE Sensex skyrocketed over 1300 points in the morning session on Friday after Finance Minister Nirmala Sitharaman announced a slew of measures to revive the ailing economy. This can certainly turn the tide for the economy & markets!