Effective Tax Rate

Explanation: The Effective Tax Rate (ETR) is the percentage of a company’s pre-tax income that is paid in taxes. It is calculated by dividing the total tax expense by the company’s pre-tax income. The ETR provides insight into the overall tax burden faced by a company and is used to assess its tax efficiency and compliance with tax regulations.

Example: TCS had an effective tax rate of 25.66% as of FY23. This means that TCS paid approximately 25.66% of its pre-tax income in taxes during the fiscal year. The effective tax rate reflects the actual tax expense incurred by TCS relative to its pre-tax earnings. A lower effective tax rate may indicate tax optimization strategies or tax incentives, while a higher effective tax rate may result from fewer tax deductions or higher tax liabilities. The effective tax rate is an important financial metric used by investors and analysts to evaluate a company’s tax management practices and assess its overall financial performance.

You can view the Effective Tax Rate value for any company on Radar under the Quarterly Results or Yearly P/L sections.