Effective tax rate
A company's tax expense divided by its profit before tax, which can differ from the headline tax rate.
Tax incentives, losses carried forward, income taxed at different rates and deferred tax all make the effective rate differ from the statutory rate. A sudden fall in the effective rate lifts net profit without any change in the business.
Example
Tax of ₹50 crore on profit before tax of ₹200 crore is an effective rate of 25%.
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