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Further, withholding tax rates have been lowered in respect of certain payments.
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Threshold limits for TDS on various payments increased. P: Provisions of Taxes Deducted at Source (TDS) rationalized. For example, a large company would have paid a tax rate of 34.61% but income from royalty on patents developed would attract a lower tax rate of 10%. I: This would encourage innovation among Indian residents. P: Introduction of reduced rate of tax of 10% on income by way of royalty in respect of a patent developed and registered in India. MSMEs and SMEs are major job creators and the reduced corporate tax rate will boost growth. I: This move will encourage entrepreneurship in India. P: Effective corporate tax rate for small companies having turnover less than Rs 5 crore reduced to 31.96%. The new startups would also generate employment and bring innovation in India. I: This move will incentivise development of new technology in India. However, the MAT would be applicable on such startups. P: New startups, involving innovation development, set up before Approposed to be provided with 100% deduction of profits for a period of 3 years out of 5 years (subject to satisfaction of certain conditions). Thus, the companies may prefer to claim the deductions and incentives which may result in reduced effective tax rate rather than opting for lower rate of tax. Impact (I): Whereas this move is intended to provide the much needed boost to the manufacturing sector and the 'Make in India' initiative of the government, considering the capital-incentive nature of the manufacturing industries, the benefit of reduced rate may be of little help in the initial years. Proposal (P): New manufacturing companies incorporated on or after Mahave been provided an option either to adopt a reduced corporate tax of 27.55% (where the income exceeds Rs 1 crore but does not exceed Rs 10 crore) or 28.84% (where income exceeds Rs 10 crore) provided such companies do not claim profit-linked / investment-linked deduction or do not avail of investment allowance and accelerated depreciation.