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Top firms paid an average 25.8% tax
August, 24th 2009

Even as the Centre has proposed to bring down the corporate tax rate from 30 per cent to 25 per cent beginning April 2011, the government is not going to lose anything as the Indian companies are paying almost what the government plans to fix as corporate tax without any surcharge and cess.

According to a study of 272 companies (from CMIE Prowess database) that form a part in the list of BSE 500 companies and posted a positive profit before tax, the total direct tax paid by these companies amounted to 25.8 per cent of the profit earned in 2008-09.

The tax paid amounted to Rs 50,428 crore. However, the tax liability on them at the rate of 33.9 per cent that they are supposed to pay would amount to Rs 66,257 crore. The actual collection was lower by Rs 15,829 crore in 2008-09.

The gap is primarily on account of the exemptions that companies claim as offered by the government.

Under the new tax code, the total tax applicable would be 25 per cent. While it will help reduce the complexity in tax payment, it would not lead to a loss in revenue for the government even at a lower tax rate as the loss on account of exemptions will go away.

Within the list of companies for which the data was available, many companies that earn profits in excess of Rs 1,000 crore, paid direct tax of less than 20 per cent.

The list includes companies like Bharti Airtel, Tata Motors, Reliance Infrastructure, Hindustan Unilever, Mahindra & Mahindra and Infosys Technologies among others.

The direct tax code aims at widening the base of taxation through discontinuation of incentives, reducing threshold limit for companies under transfer pricing, etc, while reducing the taxation rates, said Ajay Seth, chief financial officer, Maruti Suzuki India.

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