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INDEX
  • What is Corporation?
  • Sources of Income for a Company
  • Taxes on Income for Domestic Companies (AY 2020-21 Onwards)
  • Tax Rates Applicable to Foreign Companies (AY 2025-26)
  • Minimum Alternate Tax (MAT)
  • Income Tax Return Filing Deadlines
  • Tax Return Forms for Companies
  • Tax Audit Requirements

Corporate Tax in India

Budget 2024 Update

  1. Reduction in Tax on Foreign Companies:
  • The tax rate on foreign companies, specifically on income other than royalty and technical fees, has been reduced from 40% to 35% for FY 2024-25.

What is Corporation?

A Corporation is a separate legal entity distinct from its owners. Both domestic and foreign companies are required to pay corporate tax under the Income Tax Act.

  • A domestic company is taxed on its global income, i.e., income earned worldwide.
  • A foreign company, on the other hand, is taxed only on income earned within India, meaning the income accrued or received in India.

For more Details on How to start a Private Company in India

Sources of Income for a Company

Before discussing the tax rates, it’s important to understand the types of income a company may earn:

  1. Business Profits: Income generated through business operations.
  2. Capital Gains: Earnings from the sale of assets like property or stocks.
  3. Rental Income: Earnings from leasing or renting out property.
  4. Income from Other Sources: This includes dividends, interest, and other miscellaneous income.

Tax Rates Applicable to Domestic and Foreign Companies

Taxes on Income for Domestic Companies

The income tax rates applicable to domestic companies are based on their turnover for the financial year 2017-18 and their choice of tax regime under the Income Tax Act. The following rates apply:

Section

Tax Rate

Surcharge

Section 115BA (Turnover up to Rs. 400 crore )

For more Details click here on SEC 115BA,

25%

7%/12%* (Depending on income)

Section 115BAA

For more Details click here on SEC 115BAA

22%

10%

Section 115BAB

For more Details click here on SEC 115BAB

15%

10%

Any other case

30%

7%/12%* (Depending on income)

Note:

  • Surcharge: For companies under Section 115BA, the surcharge is 7% for income above Rs. 1 crore but up to Rs. 10 crore, and 12% for income exceeding Rs. 10 crore.
  • If a company opts for Section 115BAA or 115BAB, the surcharge is a flat 10%, regardless of total income.

Tax Rates Applicable to Foreign Companies

For foreign companies, the tax rate on income is categorized based on the nature of the income:

Nature of Income

Tax Rate

Royalty received or fees for technical services from government/Indian concerns (under an agreement made before April 1, 1976)

50%

Any other income (From AY 2020-21 to AY 2024-25: taxed at 40%)

35%

Surcharge Rates for Foreign Companies

Condition

Surcharge Rate

If total income exceeds Rs. 1 crore but not Rs. 10 crore

7% (on domestic companies) / 2% (on foreign companies)

If total income exceeds Rs. 10 crore

12% (on domestic companies) / 5% (on foreign companies)

Health & Education Cess: A 4% cess on the total income tax, including applicable surcharge, is levied.

Minimum Alternate Tax (MAT)

  • MAT Rate: All companies (including foreign companies) are required to pay Minimum Alternate Tax (MAT) at the rate of 15% on book profits if the tax calculated under the normal provisions is less than 15% of the book profits.
  • MAT applies unless the company opts for taxation under Section 115BAA or Section 115BAB.

Income Tax Return Filing Deadlines

  • Due Date for Filing: Companies must file their income tax returns by 15th November 2024 for FY 2023-24 (AY 2024-25). This applies to all companies, including those that were newly incorporated during the financial year.
  • For Companies with Transfer pricing, the filing deadline was extended to 30th November 2024 due to the pandemic.

Tax Return Forms for Companies

  • ITR 6: All companies (except those claiming a deduction under Section 11) need to file their returns using Form ITR 6.
  • ITR 7: Companies registered under Section 8 of the Companies Act, 2013, are required to file their returns using Form ITR 7.

Tax Audit Requirements

  • Tax Audit: Under the Income Tax Act, certain companies must get their accounts audited and submit a tax audit report along with the income tax return. This audit ensures compliance with the tax provisions.
  • Due Date for Tax Audit Report: The tax audit report must be submitted by 30th September each year. For FY 2023-24 (AY 2024-25), the deadline was extended to 31st October 2024.
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