Budget 2024: Corporate tax on foreign companies reduced from 40% to 35%

New Delhi: Finance Minister Nirmala Sitharaman on Tuesday announced a reduction in the corporate tax rate on foreign companies to 35 per cent to attract foreign capital flow.

Budget 2024-25 has proposed a reduction in the rate of income-tax chargeable on income of foreign companies (other than that chargeable at special rates) from 40 per cent to 35 per cent.

"To attract foreign capital for our development needs, I propose to reduce the corporate tax rate on foreign companies from 40 per cent to 35 per cent," she said in her Budget speech.

The pre-budget Economic Survey on Monday made a strong case for seeking foreign direct investments (FDI) from Beijing to boost local manufacturing and tap the export market despite strained relations with China.

As the US and Europe are shifting their immediate sourcing away from China, it is more effective to have Chinese companies invest in India and then export the products to these markets rather than importing from the neighbouring country, the Survey had said.

Cut in the tax rate for foreign companies from 40 per cent to 35 per cent and the abolition of the 2 per cent equalisation levy was a surprise, Deloitte India Partner Rohinton Sidhwa said.

These would be replaced with alternative levies in the run-up to implementing Pillar 1 and 2 obligations, he added.