In the biggest reduction in 28 years, the government on Friday slashed corporate tax by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a Rs 1.45-lakh crore tax break.

Just months after presenting her maiden Budget that was hailed as “development-friendly” and “future-oriented”, Sitharaman announced cutting corporate tax rate to 25.17% to bring them at par with other Asian countries such as China and South Korea but at the expense of potentially breaching the 3.3% fiscal deficit target.

 

Markets celebrated the announcement, with the BSE Sensex jumping by the most in a decade while the rupee also climbed against the US dollar.

Logging its biggest intra-day spike in over a decade, the 30-share BSE Sensex index soared 2,284.55 points to a peak of 38,378.02, before settling 1,921.15 points or 5.32% higher at 38,014.62.

In the fourth tranche of post-budget economic stimulus measures, Sitharaman cut base corporate tax for existing companies to 22% from the current 30%; and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15% from current 25%.

 

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