An exemption-free tax price of 22% — 25.17% together with cesses and surcharge — sounds enticing, however an evaluation of the tax legal responsibility of corporations listed in Sensex suggests greater than half have purpose to stay to the prevailing tax regime.

Funds information reveals the typical efficient tax price (ETR) — taxes as a share of pretax income — for roughly eight.four lakh corporations that filed returns for 2017-18 was simply over 29%. A
TOI evaluation of the 21 nonfinancial corporations within the Sensex reveals solely 10 confronted an ETR of over 25% in 2018-19. The remaining 11 had an ETR beneath the 25.17% that they must shell out in the event that they migrated to the brand new regime.

Banks and monetary sector corporations have been excluded from the evaluation as a result of their taxes are calculated considerably in a different way (primarily due to provisioning) and together with them may need distorted the general image. After excluding the 9 monetary sector corporations within the sensex, the general common ETR labored out to 22.9% in 2018-19. However particular person ETRs fluctuate broadly — from Solar Pharma with a damaging tax burden of 13.5%, to Tata Metal, which paid 35% of its pre-tax income as tax.


The precise tax paid can, nevertheless, embrace refunds for further tax paid in earlier years or further legal responsibility for deferred taxes (ETR1 within the accompanying graphic). We due to this fact regarded additionally on the present tax as a share of the revenue earlier than taxes (ETR2 within the graphic). By this measure, the typical for these 21 corporations was 25.7%, near what the brand new regime would supply.

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Once more, about half the corporations won’t have a compelling purpose to make the shift. Even corporations simply over the 25% mark on this chart may suppose twice since as soon as exemptions are given up they can’t be availed of in future. Having stated that, a variety of company tax specialists
TOI spoke to stated most giant corporations would transition to the brand new regime as a result of over the past a number of years, exemptions have been whittled down.

Notably, virtually all IT corporations are beneath the 25% ETR stage — clearly due to tax incentives given to the sector — as is Reliance Industries, the corporate paying the very best taxes on this listing however with an ETR of barely 20% if one seems on the present tax legal responsibility.