Recent Reforms in India’s Corporate Income Tax Regime: Rationale, Impacts, and Improvements

Supriyo De ()
Additional contact information
Supriyo De: National Institute of Public Finance and Policy

Chapter Chapter 9 in India’s Contemporary Macroeconomic Themes, 2023, pp 207-236 from Springer

Abstract: Abstract In a recent innovative policy reform, India’s corporate income tax system was overhauled with optional lower rates in lieu of giving up complex deductions. However, official data reveals a puzzle wherein larger companies have opted more for the lower optional rates, while smaller ones appear reticent in switching to the optional regime. This paper explores this issue using empirical methods. The evolution of tax rates is tracked through reforms simplifying the tax system in the 1990s, the subsequent conundrum of zero-tax companies leading to the introduction of minimum alternate tax, and the persistence of lower effective tax rates for larger companies. This provides the rationale for a simpler tax regime with lower rates but fewer deductions. The user cost of the capital approach is used to examine the economically relevant tax impact across various sectors and ownership types. The results indicate that in terms of user cost, the various lower tax options are not attractive, and under certain situations may be worse for younger and smaller companies. In light of the analysis, policy options are suggested to improve the scheme so as to achieve the laudable objective of implementing a simple tax regime with lower rates and minimal deductions.

Keywords: Corporate income tax; User cost of capital; Minimum alternate tax; D21; E22; H25 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isbchp:978-981-99-5728-6_9

Ordering information: This item can be ordered from
http://www.springer.com/9789819957286

DOI: 10.1007/978-981-99-5728-6_9

Access Statistics for this chapter

More chapters in India Studies in Business and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().