Corporate Tax in India
A corporation is a company that is separate from its shareholders legally. Both domestic and foreign businesses are required to pay corporate tax in India under the Income-tax Act. In order to calculate the corporate tax in India the companies are further categorized as domestic and foreign companies. The domestic companies are registered under the Indian Companies Act. It involves any company that has its entire business and management in India.
On the other hand, foreign companies are firms that are not registered under the Indian Companies Act and have their base and management outside of India. Foreign firms are liable for corporate taxes in India only when the income is earned within the continent. On the other hand, domestic companies are taxed on their overall income.
The income of a corporation in India is subject to corporate tax post deductions like depreciation, administrative expenses, cost of goods sold, and salary expenses. In India, corporations both domestic and foreign must pay a corporation tax based on the corporate income tax rate and their yearly turnover.
Benefits of Corporate Tax in India
In addition to understanding what a corporate tax in India and the Corporate Tax rate in India, it is crucial to be aware of its many advantages:
- Corporate tax in India is a crucial component of every tax system, particularly in developing nations with few other sources of income. Due to the relatively high corporate taxes, substantial sums of money are raised for public projects
- Perhaps most significantly, personal income taxes are primarily protected by corporate tax in India. Rich people increasingly shift their profits from the personal tax bracket to corporate tax in India as the income tax rates for companies are less when compared to the personal tax rates
- Companies all across the world are supported by unused, uninvested capital deposits totaling trillions of dollars. They are like a string; cutting their taxes won’t increase expenditure or output. Some claim that corporate tax in India is a crucial democratic check on excessive corporate power.
Corporate Income Tax for Various Business Categories
A summary of the Indian Business Tax Rate is provided below:
Company Tax Percentage for U.S. Businesses
Both governmental and private businesses that are listed under the Companies Act of 1956 must pay this tax. Currently, local businesses pay a 30% tax rate.
Additionally, if total revenue is between ₹1 crore and ₹10 crore, the Income Tax Act imposes a 7% surcharge. A 12% surcharge is applied to net revenue that surpasses ₹10 crore for a business.
Domestic companies now have the choice to pay tax at a rate of 25.168% thanks to Section 115 BAA. The following table breaks down this company’s tax rate:
| Base Rate of Tax (%) | Surcharge Applied (%) | Cess Applied (%) | Effective Tax Rate (%) |
|---|---|---|---|
| 22 | 10 | 4 | 25.168 |
Company Tax Percentage for International Businesses
Foreign corporations are required to pay corporate income tax on the revenue they generate within a certain time period. Royalties and other fees are subject to a 50% business tax rate in India, while the remaining revenue is subject to a 40% tax rate.
A 2% surcharge is applied to international companies with total incomes between ₹1 crore and ₹10 crore. In the event that its total revenue surpasses ₹10 crore, a 5% surcharge will be added.
Checklist for Corporate Tax in India
When filing for a corporate tax in India, the following information must be provided:
Information about the business
- Account balance for year-end transactions
- Specify If this is your first year submitting corporate tax in India
- Address of the business corporation, business number, name of the business corporation, number, and date of incorporation
- Name and share percentages of the shareholders’ main product or service of the business
- Phone number and name of the president or director
- Previous years’ corporation tax returns if available
Information about corporate income
- Corporate gross income Information on corporate expenses
- Publicity and promotion
- Business fees, memberships, and taxes
- Charges on a credit card
- Franchising costs
- Office costs at home
- Office costs
- Materials acquisition Salaries
- Employee salary
- Supplies
- Insurance for businesses
- Costs associated with computers
- Donations
- Administrative and general costs
- Bank fees and interest
- Both food and entertainment
- Fees for expertise
- Warehouse and shipping costs for a rental
- Subcontracts
- Telephone
- Travelling costs
- Vehicle and additional costs
- Information on dividend
- Details of the dividend to shareholders
- Account R/P information
- Account Receivable information
- Information on payables
- Information regarding the price of corporate capital assets
- Tax rates applicable
- Taxes on Income
Current Corporate Tax Rate in India
The domestic company corporate tax rate in India of AY 2024-25 is displayed below.
| Sections | Tax rate | Surcharge |
|---|---|---|
| Section 115BA | 25% | 7%, for companies with net income less than 10 crores
12%, for companies with net income more than 10 crore |
| Section 115BAA | 22% | 10% |
| Section 115BAB | 15% | 10% |
| Any other case | 30% | 7%, for companies with net income less than 10 crores
12%, for companies with net income more than 10 crore |
For AY 2024-25, the following income tax rate for companies is collected based on their turnover. Also, the tax rates for foreign companies (companies other than domestic companies) are unchanged for AY 2024-25, according to the Finance Act of 2022. As a result, for the AY 2024-2025 period, the tax rates for foreign corporations must remain unchanged from those specified in the Finance Act 2021.
| Nature of Income | Tax Rate |
|---|---|
| Any royalties or fees collected from the government or any issues with an Indian under a treaty signed before 1 April 1976 and ratified by the central government | 50% |
| Any extra income | 40% |
| Particulars | Tax rate |
|---|---|
| If cumulative income exceeds ₹1 crore but not ₹10 Crore | 7% of tax calibrated on domestic firm 2 % of tax calibrated on foreign companies as per the rates mentioned above |
| If the total revenue surpasses ₹10 crore | 12% of tax is collected from domestic company 5 % of tax is collected on foreign companies as per the above rates |
He’s Ness and Education Cess: An additional 4% of the computed income tax plus any applicable surcharge will be added to the total amount of tax that must be paid before this cess.
In the event that the tax determined using the aforementioned rates is less than 15% of book profits, all businesses, including foreign ones, must pay the Minimum Alternate Tax (MAT) at the rate of 15%. If the business chooses not to use Section 115BAA or Section 115BAB.
Corporate Tax Rate in India for AY 2024 -2025
Corporate Income tax with a turnover or gross receipts up to ₹400 crores, at 25%. Corporate Tax rate in India for companies with a turnover or gross receipts exceeding ₹400 crores and corporate Income Tax Rate of 30%
Surcharge: 7% of taxable income for net income over ₹1 crore but under ₹10 crore, and 12% of taxable income for net income over ₹10 crore.
4% of income tax plus a surcharge is the health and education levy.
Note: Minimum Alternate Tax (MAT) will be assessed at 15% on Book Profit in A.Y. 2023-24.