The government-owned Oil and Natural Gas Company (ONGC) has finally opted for the lower tax of 22% resulting in a decrease of Rs 1,304 crore in current taxes, and a reduction of Rs 8,541 crore in deferred taxes.
The Maharatna company informed the investor while announcing its second-quarter results for the current financial year. “During the quarter, the Company has decided to opt for a lower tax regime u/s 115BAA of the Income Tax Act, 1961 with effect from FY 2020-21. Accordingly, the Company has recognized provision for tax expenses and re-measured its net deferred tax liabilities,” said the company in a statement.
After the introduction of Section 115BAA of the Income Tax Act 1961 through the Taxation Laws (Amendment) Act in 2019, companies in India have an option to pay corporate income tax at the rate of 22% plus applicable surcharge and cess (lower rate) as against the earlier rate of 30% plus applicable surcharge and cess, subject to certain conditions.
ONGC had so far not opted for the lower taxes citing a substantial amount of unutilised MAT tax credit available to the company.
Indian tax laws require companies to pay a Minimum Alternate Tax (MAT) — set at 18.5% earlier, before being cut to 15% from FY20, when the new tax regime came into effect. The difference between the MAT paid by the company and the actual incidence of tax according to general income tax provisions is considered MAT credit (when MAT paid is higher than the latter). Companies can set off accumulated MAT credit against future tax expenses for a 15 year period.
Meanwhile, the company has reported gross revenue of Rs 24,353 crore in the second quarter, which is 44% higher than the revenue in the same quarter last year. Net profit increased 6.65 times to Rs 18,348 crore in the second quarter. The board of the company has approved an interim dividend of 110% -- Rs 5.50 on each equity share of Rs 5. The total payout on this account will be Rs 6,919 crore.