Corporate Tax

By : Neha Dhyani

Updated : Jun 3, 2022, 4:29

All corporate entities in India have to pay a direct tax on the profit or net income from their businesses, domestic or foreign. The tax is called the Corporate Tax. The Income Tax Act 1961 prescribes the rates at which the Corporate Tax will be levied. It is based on the slab rate system, depending upon the type of corporate entity and its revenue.

The Corporate Tax Rate in India is different for domestic and foreign entities.

Corporate Tax for Domestic Entities

Corporate Tax Slab for Assessment Year 2022-2023

Condition

Rates

Turnover or Gross Receipt in the previous year 2018-19 not exceeding ₹ 400 crores

25%

I opted for Section 115BA

25%

I opted for Section 115BAA

22%

I opted for Section 115BAB

15%

Any other Domestic Company

30%

Surcharge Rates in Addition to the Above Rates

Condition

Rates

Taxable income above ₹ 1 crore - Up to ₹ 10 crore

7% of Corporate Tax

Taxable income above ₹ 10 crore

12% of Corporate Tax

If Company opts for taxability u/s 115BAA or Section 115BAB

10% of Corporate Tax

Reduced Rate for Certain Domestic Companies

Domestic corporations not claiming any exemptions or seeking any incentives can pay tax at the rate of 22% along with a surcharge (10%) and cess (4%). This provision is made available by sec 115BAA of the income tax act from FY 2019-20 (AY 2020-2021). The effective Corporate Tax Rate for such companies would be 25.17%. The provision of minimum alternate tax (MAT) will also not be applicable for these companies.

Reduced Rate for Newly Setup Domestic Manufacturing Companies

To boost the flagship Make-in-India initiative and attract new investment in the manufacturing sector, the Government added another new provision to the Income Tax Act. With effect from FY 2019-2020, newly set up domestic manufacturing companies can avail concessional tax rate of 15% under sec 115 BAB.

However, the option is available only for companies who do not avail of any exemption or incentive and commence operation before 31/03/2024. In addition, a 10% surcharge and 4% cess will also apply to the above rates, which will take the effective Corporate Tax Rate to 17.16%.

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Corporate Tax for Foreign Entities for AY 2022-2023

Nature of Income

Tax Rate

Royalty or fee for technical services received from Government or an Indian concern in pursuance of an agreement made before 1st April 1976 and approved by the Central Government

50%

Any other income

40%

Surcharge in Addition to the Above Rates

Condition

Rate

Taxable Income above ₹ 1 Crores but up to ₹ 10 Crores

2%

Taxable Income above ₹ 10 Crore

5%

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Health and Education Cess

Health and Education Cess of 4% will always be paid on the amount of income tax and surcharge (if any) for both domestic and foreign companies.

Minimum Alternate Tax

Suppose the tax calculated at the above rates is less than 15% of the book profit of the company (both domestic and foreign). In that case, the company is liable to pay a Minimum Alternate Tax (MAT) calculated at 15% of the book profit. However, MAT is not applicable for companies opting to pay Corporate Tax under section 115BBA and section 115BAB.

Filing of Corporate Tax Return

All domestic and foreign companies in India have to file their Corporate Tax return on or before 30th October every year.

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FAQs on Corporate Taxes

Q.1. What is the Corporate Tax Rate for domestic companies in India?

The Corporate Tax Rate for domestic companies in India is 25% for companies with a gross turnover not exceeding 400 crores in the previous year, 2018-19, and 30% for other companies. A concessional rate of 25%, 22% and 15% is available for corporates opting for section 115BA, 115BAA and 115BAB respectively.

Q.2. What is the Corporate Tax Rate for foreign companies in India?

Corporate Tax Rates for Foreign companies in India are taxed at 50% for royalty and technical fees received from the Government in pursuance of an agreement made before 1st April 1976, and 40% on other income.

Q.3. What is the Corporate Tax Rate of surcharge for domestic companies?

The Corporate Tax surcharge rate is 7% for taxable income above 1 crore up to 10 crores and 12% for income beyond 10 crores. However, if the company opts for sec 111BAA and 115BAB, the surcharge will be 10%.

Q.4. What is the Corporate Tax Rate of surcharge for foreign companies?

The Corporate Tax surcharge rate for foreign companies is 2% for taxable income above 1 crore up to 10 crores, and 5% for taxable income above 10 crores.