A Department of Revenue (DoR) analysis has thrown up a startling fact: India's most profitable 335 companies paid an average of 23.9% tax on their profits in FY17 - 10.7 percentage points lower than the statutory rate of 34.6% because of a wide range of concessions and incentives. Each of these 335 companies had reported profits before tax of Rs 500 crore or more for FY17.
However, companies with profits of less than Rs 500 crore paid about 29% as did those with a profit of less than Rs one crore.
The analysis points out that the smallest companies rarely manage to take advantage of various tax incentives and concessions that the law permits, and therefore bear higher tax liability. The pattern of tax incidence for companies of different sizes was not very different from the previous years.
The analysis is based on tax returns filed until November 30, 2017, by about 6.01 lakh companies on incomes earned in 2016-17. Returns for the financial year 2016-17 are filed in 2017-18 and more companies may file their returns before the end of the current fiscal year.
The analysis further shows that the richest companies also account for a disproportionately large share of the total income, profits and tax liability of corporate India.
For instance, in the financial year 2016-17, the 335 richest companies accounted for 61.2% of the share of profits before taxes reported by the 6.01 lakh companies, 50.2% of the total income, and 54.4% of the share in corporate tax liability.
The same data analyzed differently showed that over 70% of the companies filing returns paid less than 30% as taxes on their profits for 2016-17. About 17% paid 30-33% tax on their profits and a little over 6% paid more than 33%.
The 1.4 lakh companies that paid taxes at the rate of 30% or more accounted for 36.6% of the share of profits of the 6.01 lakh companies, about 59.8% of their total income and 54.4% of their tax liability.
Further, as manufacturing sector companies are usually the beneficiaries of various tax incentives given by the government, their effective tax rate, at 24.7%, was four percentage points lower than the effective rate for service sector companies.
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DoR's analysis: Rich cos pay fewer taxes
By IndianMandarins - 2018-02-05 09:00:54
A Department of Revenue (DoR) analysis has thrown up a startling fact: India's most profitable 335 companies paid an average of 23.9% tax on their profits in FY17 - 10.7 percentage points lower than the statutory rate of 34.6% because of a wide range of concessions and incentives. Each of these 335 companies had reported profits before tax of Rs 500 crore or more for FY17.
However, companies with profits of less than Rs 500 crore paid about 29% as did those with a profit of less than Rs one crore.
The analysis points out that the smallest companies rarely manage to take advantage of various tax incentives and concessions that the law permits, and therefore bear higher tax liability. The pattern of tax incidence for companies of different sizes was not very different from the previous years.
The analysis is based on tax returns filed until November 30, 2017, by about 6.01 lakh companies on incomes earned in 2016-17. Returns for the financial year 2016-17 are filed in 2017-18 and more companies may file their returns before the end of the current fiscal year.
The analysis further shows that the richest companies also account for a disproportionately large share of the total income, profits and tax liability of corporate India.
For instance, in the financial year 2016-17, the 335 richest companies accounted for 61.2% of the share of profits before taxes reported by the 6.01 lakh companies, 50.2% of the total income, and 54.4% of the share in corporate tax liability.
The same data analyzed differently showed that over 70% of the companies filing returns paid less than 30% as taxes on their profits for 2016-17. About 17% paid 30-33% tax on their profits and a little over 6% paid more than 33%.
The 1.4 lakh companies that paid taxes at the rate of 30% or more accounted for 36.6% of the share of profits of the 6.01 lakh companies, about 59.8% of their total income and 54.4% of their tax liability.
Further, as manufacturing sector companies are usually the beneficiaries of various tax incentives given by the government, their effective tax rate, at 24.7%, was four percentage points lower than the effective rate for service sector companies.
