Corporate tax cut not likely in Budget 2010-11

NEW DELHI: The government may not tinker with the corporate tax rates in the Budget 2010-11 despite pressure from India Inc to slash rates or at
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least do away with surcharge and cess.

The industry has been clamouring for a reduction in corporate tax rate to 25% from the current over 30%, including education cess and surcharge.

Corporate tax rates could be kept at the same level and the industry may have to wait for fiscal 2011-12 for the rate to be 25% as proposed in the draft direct taxes code, said a senior Finance Ministry official.

Currently, domestic firms earning total income of over a crore in a year have to pay corporate 30% tax. Besides, surcharge of 10% and education cess of 3% are imposed on them, taking the total tax liability to 33.99%. Those earning up to Rs one crore of income draw a total tax liability of 30.9%.

"Rate changes are unlikely in the Finance Bill 2010," global fianncial consultancy firm Ernst and Young tax partner Sudhir Kapadia said.

He, however, pointed out that the government could go for a bold move like the abolition of the surcharge and cess, and introduce a flat rate of 30%