The government has cut the effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies.
This, she said is being done to promote investment and growth.
In effect, the corporate tax rate will be 22 per cent for domestic companies, if they do not avail any incentive or concession.
Making the announcement, Finance Minister Nirmala Sitharaman said: "In order to promote growth and investment, a new provision has been inserted in the Income Tax Act, with effect from financial year 2020. It will allow any domestic company an option to pay income tax at 22 per cent subject to the condition that they will not avail any exemption or incentives".
The changes in the Income Tax Act and Finance Act will be made effective through an ordinance.
The minister also said companies opting for 22 per cent income tax slab would not have to pay minimum alternative tax (MAT). Sitharaman further said, new domestic manufacturing companies incorporated after October 1, can pay income tax at a rate of 15 per cent without any incentives.
Meaning, effective tax rate for new manufacturing companies will be 17.01 per cent inclusive of all surcharge and cess.
Sitharaman further said companies can opt for lower tax rate after expiry of tax holidays and concessions that they are availing now.
The finance minister also announced that there will be no enhanced surcharge on capital gain where Securities Transaction Tax (STT) has already been paid.
The Bombay Stock Exchange (BSE) Sensex surged over 2,100 points post government's corporate tax relief decision. The Nifty 50 on the National Stock Exchange also was over the 11,000 mark.
(With additional information from PTI)