So effective have some incentives been that companies making larger profits are now paying a lower rate of effective tax, reveals my analysis of national tax data over five years, specifically, the Statement of Revenue Impact of Tax Incentives under the Central Tax System.
Effective tax rate is the tax rate actually paid by companies on profits, calculated as tax actually paid divided by profits before tax. For instance, the effective tax rate for a company making a profit up to Rs 1 crore was 29.37%; while the corporate tax rate was 22.88% for those with profits greater than Rs 500 crore in 2014-15.
This means companies making smaller profits are competing in an unequal environment against bigger companies with substantial taxation benefits, with the gap in effective tax rates widening over the years.
— source indiaspend.com | Parakh | 19 Mar, 2016