Union Budget 2021 | Firms with the highest profits paid the least effective tax in FY2019

Corporate tax rates saw sharp reductions in 2018 and 2019. After remaining constant at 34.61% between FY2015 and FY2017, it fell to 30% in FY2018. The rate was cut again in FY2019 to 25.71%. However, the rates are skewed, with uneven distribution among companies.

The effective tax rate of the entire base of companies reporting profits was 27.81 per cent for financial year 2018-19 as against the rate of 29.49 per cent reported in the financial year 2017-18.

Steep fall

India’s corporate tax rate has fluctuated over the years, with FY18 and FY19 recording steep drops. In FY19, the corporate tax rate in India was 25.71%.


More profit, more tax

Higher effective tax rates were paid by firms having a larger share in profits. Firms with an effective tax rate between 25% and 33% had 58.5% share in total profits.


Skewed towards the richest

While the tax rate was highest for firms with profits between Rs. 100 and Rs. 500 crore, firms with the highest profits (more than Rs. 500 crore) had the least effective tax rate.


Global snapshot

In 2019, India’s corporate tax rate was among the lowest in the world.

Also read: Union Budget 2021 | While “health and wellbeing” budget records 137% rise, health outlay declines 9%

Source: Budget documents | *Figures for FY2021-22 are Budget estimates; FY2020-21 are revised estimates.

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