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Corporate Tax In India
Know everything about corporate tax in India and corporate tax rates in 2024. Avail expert support for tax filing today!
List of documents needed
Private Limited Company
- Certificate of Incorporation
- PAN card of Company
- Articles of Association, AOA
- View all documents
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List of documents needed
Private Limited Company
- Certificate of Incorporation
- PAN card of Company
- Articles of Association, AOA
- View all documents
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Corporate Tax In India - An Overview
The corporate tax also known as a corporation tax is a direct tax levied on net income, Capital gains, and profits made by entities both domestic and foreign. This tax is imposed at a specific rate as per the provision of Income Tax Act of 1961. The company tax rate is based on the type of entity and revenue earned. The slab rate system outlines the corporate tax rate levied on it, and it differs for domestic and foreign companies.
Benefits of Corporate Tax Filing in India
Filing corporate taxes in India provides companies with opportunities for tax deductions under sections 54GA and 54EC, incentivising investments in capital gains and charitable donations. Here are some of the benefits of filing corporate taxes in India:
Can Retain the Profit For Efficient Tax Planning
Business owners can effectively benefit from proper corporate tax planning to retain their profits within the business. This facilitates reinvestment of profits and allocate them for expansion for a sustained financial growth.
Easily Write Off the Loss
Corporates are provided with a straightforward process when it comes to writing of the losses. Unlike individual proprietors, corporations can write off the total amount of loss incurred.
Deductibility of Business Expenses
Business tax returns permit the user to detect legitimate business expenses that can include family health insurance. This reduces the overall tax liability and supports the well being of the employees helping a positive work can be around me
Access to Better Financial Instruments
Paying corporate tax helps you to invest in retirement plans and tax differ trust. These instruments can empower the companies to manage the finances effectively
Can Retain the Profit For Efficient Tax Planning
Business owners can effectively benefit from proper corporate tax planning to retain their profits within the business. This facilitates reinvestment of profits and allocate them for expansion for a sustained financial growth.
Easily Write Off the Loss
Corporates are provided with a straightforward process when it comes to writing of the losses. Unlike individual proprietors, corporations can write off the total amount of loss incurred.
Deductibility of Business Expenses
Business tax returns permit the user to detect legitimate business expenses that can include family health insurance. This reduces the overall tax liability and supports the well being of the employees helping a positive work can be around me
Access to Better Financial Instruments
Paying corporate tax helps you to invest in retirement plans and tax differ trust. These instruments can empower the companies to manage the finances effectively
Documents Required for Corporate Tax Filing
Here are few documents required for business tax returns & filing:
- ITR-1: The primary ITR form designed for domestic companies with a total income of up to ₹50 lakhs, widely utilised in common tax filing scenarios
- Companies with a total income surpassing ₹50 lakhs, Form ITR-2 caters to businesses with a higher financial threshold
- Companies involved in specific activities like banking, insurance, and finance, ITR-3 is the designated form for filing taxes in such specialised sectors
- Companies, excluding those claiming deduction under Section 11, are mandated to file their returns using Form ITR 6
- Companies registered under Section 8 of the Companies Act, 2013, must file their returns using Form ITR 7
Corporate Tax Filing Requirements
- Any company registered under the Companies Act of 1956 is required to pay corporation tax
- All domestic companies and foreign companies functioning in India should pay corporate tax
- Both public and private companies are required to pay corporation tax based on their income
- Foreign companies that are permanently established in India is also expected to pay corporate tax
Corporate Tax Filing for Different Entity Types
Corporate tax filing is crucial irrespective of the type of business entity. The process requires thorough auditing and accounting along with an expertise in tax compliance. Here is a brief outline of corporate tax filing for different entities:
Corporate Tax Filing for Proprietorship Firm
- Individuals with business income functioning as a sole proprietor or proprietorship firms
- Proprietorship forms require audits if the overall turnover is above ₹1 crore or ₹50 lakh for gross receipts during a particular financial year
- The due date for non auditor proprietorship is July 31 and for proprietorships requiring an audit it is extended until September 30. Forms ITR3 and ITR 4 Sugam should be submitted for return filing.
LLP Tax Return
- All the registered limited liability partnerships must file annual income tax returns respective of income or loss
- The limited liability partnerships should file their corporate tax on October 31 in case of any international transactions the deadline is given till November 30
- Form ITR5 has to be used for online filing.
Partnership Tax Return Filing
- All partnership firms registered and treated as separate legal entities must file annual income tax returns
- The deadline is given by October 31 in case of any international transaction it is on November 30 form ITR 5 has to be used for filing the taxes.
Corporate Tax Filing for Proprietorship Firm
- Individuals with business income functioning as a sole proprietor or proprietorship firms
- Proprietorship forms require audits if the overall turnover is above ₹1 crore or ₹50 lakh for gross receipts during a particular financial year
- The due date for non auditor proprietorship is July 31 and for proprietorships requiring an audit it is extended until September 30. Forms ITR3 and ITR 4 Sugam should be submitted for return filing.
LLP Tax Return
- All the registered limited liability partnerships must file annual income tax returns respective of income or loss
- The limited liability partnerships should file their corporate tax on October 31 in case of any international transactions the deadline is given till November 30
- Form ITR5 has to be used for online filing.
Partnership Tax Return Filing
- All partnership firms registered and treated as separate legal entities must file annual income tax returns
- The deadline is given by October 31 in case of any international transaction it is on November 30 form ITR 5 has to be used for filing the taxes.
Checklist for Corporate Tax in India
Here is a checklist that simplifies the process of corporate tax filing. It provides a summary of necessary actions, from assessing corporate income tax and to ensuring all taxed entities are accounted for:
- Confirm if your business meets the criteria for mandatory ITR filing as per the Income Tax Act of 1961
- Choose the correct ITR form that suits your business structure and activities
- Gather necessary documents, including PAN card, registration certificate, income/expense reports, and TDS certificates
- Calculate your company's tax liability by subtracting allowable expenses from total revenue
- Ensure any outstanding taxes are paid before submitting the ITR, with payment options available both in-person and online
- Choose between online and offline filing methods based on convenience
- Register on the Income Tax Department's e-filing portal for online filing or submit the downloaded ITR form offline
- Foreign companies operating in India must obtain a PAN before ITR filing
- Complete mandatory registration with the Income Tax Department, with both online and offline options
- Foreign businesses must withhold tax from payments to Indian residents, with the withholding tax rate determined by the payment type
- Eligible foreign businesses can claim tax credits in India for taxes paid in their home country, using Form 67.
Current Corporate Tax Rate in India
The Indian corporate tax rate for domestic companies stands at a basic rate of 30% on total income. However, certain specified domestic companies, particularly startups, may be eligible for concessional tax rates. Here is a detailed Corporate tax rates 2024-25 in India:
Corporate Tax Rate for Domestic Companies
The Tax rate for companies for the year 2023-2024 are:
| Condition | Income Tax Rate (excluding surcharge and cess) |
|---|---|
| Total Turnover or Gross Receipts during the previous year 2020-21 does not exceed ₹ 400 crores | 25% |
| If opted for Section 115BA | 25% |
| If opted for Section 115BAA | 22% |
| If opted for Section 115BAB | 15% |
| Any other Domestic Company | 30% |
Surcharge: An additional amount of income tax will be added at the specified rate of that tax:
- 7% – Taxable income above ₹ 1 crore – Up to ₹ 10 crore
- 12% – Taxable income above ₹ 10 crore
- 10% – If the Company opts for taxability under Section 115BAA or Section 115BAB
Note: The table above outlines the Corporate Tax Rates in India for the Assessment Year (AY) 2024-2025. The rates vary based on different conditions, such as the total turnover or gross receipts, and whether the company opts for specific sections like 115BA, 115BAA, or 115BAB. Additionally, surcharge rates are specified for different income brackets, with a special rate for companies opting for taxability under Section 115BAA or Section 115BAB.
Corporate Tax Rate for Foreign Companies
For foreign companies not registered under the Indian Companies Act, 2013 with management and control situated outside India, the following tax rates apply:
| Condition | Income Tax Rate (excluding surcharge and cess) |
|---|---|
| Royalty or technical service fees received under pre-approved agreements with the Indian concern made between specific dates before April 1976 | 50% |
| Any other income | 40% |
Surcharge: An additional amount of income tax will be added at the specified rate of that tax:
- 2% – Taxable income above ₹ 1 crore – Up to ₹ 10 crore
- 5% – Taxable above ₹ 10 crore
Note: The table outlines the income tax rates for unregistered foreign companies in India. A 50% tax rate applies to royalty or technical service fees received under pre-approved agreements made before April 1976, while any other income is taxed at a rate of 40%. Additionally, surcharge rates are specified for different income brackets.
Corporate Tax Planning
Corporate tax planning is crucial for a business to grow at a high degree. Proper corporate tax planning allows a firm to make best use of deductions, tax exemptions and tax benefits with much lower tax liability. The primary objective of corporate tax planning is to increase the savings, reduce tax liability, make productive investments, terminate litigations and achieve overall stability in the company economy. This directly has an impact on the overall business regulations finance corporate law and the fiscal policy. The following aspects have to be taken into account while conducting a corporate tax planning.
- Claim appropriate exemptions claim deductions under various income heads
- Availability the expenses with respect to the accounts
- Capitalise your assets
- Claim deductions on depreciation and additional depreciation
- Analyse unabsorbed depreciation
- Make use of bad debts to avail tax benefits
Process of Corporate Tax Return Filing
Corporate tax return filing is a tedious task that requires filing multiple forms on the official portals. Even a small mistake can cause rejections. This is exactly why Vakilsearch offers an easy 4 step process with expert support:
Step 1
Consultation and Document Collection
Step 2
ITR Form Selection
Step 3
Efficient Form Completion and Verification
Step 4
Submission and Payment Assistance
1. Consultation and Document Collection
Begin the process with a consultation with Vakilsearch's experts, who will guide you through the required information and documents for your corporate tax return filing. Provide comprehensive financial records, and the Vakilsearch team will assist in organising the necessary data.
2. ITR Form Selection
Vakilsearch's experts will determine the most appropriate Income Tax Return (ITR) form for your business based on its nature, income level, and specific activities. This personalised approach ensures accurate and efficient filing, optimising for your unique circumstances.
3. Efficient Form Completion and Verification
Our team will handle the entire process of completing the selected ITR form, ensuring all sections are accurately filled. We will conduct a meticulous review to catch any errors or discrepancies. Once the form is completed, it will be verified through the necessary means, including digital signatures or physical signatures on a printed copy.
4. Submission and Payment Assistance
Our team takes care of the submission of your corporate tax return through the online portal of the Income Tax Department. If there is a tax liability, the team will guide you through the process of making the payment using approved methods.
Corporate Tax Rate in India for AY 2024 -2025
| Income Category | Tax Rate |
|---|---|
| Up to ₹400 crores (Turnover or gross receipts 2020-2021) | 25% |
| Exceeding ₹400 crores (Turnover or gross receipts 2020-2021) | 30% |
| Surcharge (if net income exceeds 1 crore but does not exceed 10 crore) | 7% of taxable income |
| Surcharge (if net income exceeds 10 crore) | 12% of taxable income |
| Health and Education Cess | 4% of Income Tax plus Surcharge |
| Minimum Alternate Tax (MAT) | 15% on Book profit (AY 2024-25) |
Note: The table provides information on the Corporate Tax Rate in India for the Assessment Year (AY) 2024-2025, distinguishing between companies with turnovers or gross receipts below ₹400 crores and those exceeding ₹400 crores. It also outlines the surcharge rates based on different income brackets, as well as the Health and Education Cess. Additionally, it mentions the Minimum Alternate Tax (MAT) applicable at 15% on Book profit for AY 2024-25.
Latest Update: From the assessment year (AY) 2024-25, subject to specific conditions, the threshold for Section 44AD has increased to ₹3,00,00,000, while the limit for Section 44ADA has been elevated to ₹75,00,000. If a non-resident chooses to be taxed in a particular year, they will not be permitted to offset any unabsorbed depreciation or carry forward losses in subsequent years. These changes will be effective from the assessment year (AY) 2024-25 and onward.
Common Mistakes to Avoid in Corporate Tax Filing
It is crucial to file your corporate tax without any errors. Here are some of the common mistakes that most of the owners make when they are filing their taxes on business:
- Filing corporate tax returns through the wrong business form
- Calculating the wrong Company tax rates
- Not collecting all the required proofs before filing
- Clubbing both business and personal expenses together
- Missing out on crucial business deductions
- Avoiding auditing and accounting proofs while filing corporate tax return
- Not aware of tax exemptions and rebates while filing income tax return and company tax returns
- No knowledge on latest tax compliance
- Making errors while filing the online corporate tax returns forms
- Submitting the wrong files
Timely Corporate Tax Submission and Deadlines
The due date for filing a return of income by a Company is October 31. However, if the assessee is involved in international or specified domestic transactions requiring a report in Form No. 3CEB, the deadline extends to November 30. The following table outlines the due dates for tax filing for the assessment year providing clarity based on the category of taxpayer:
| Category of Taxpayer | Due Date for Tax Filing | Due Date for Tax Filing For FY 2023-24 |
|---|---|---|
| Individual / HUF/ AOP/ BOI (books of accounts not required to be audited) | July 31 | 31 July 2024 |
| Businesses (Requiring Audit) | October 31 | 31 October 2024 |
| Businesses (Requiring TP Report) | November 30 | 30 November 2024 |
Meeting Corporate Tax Filing Deadlines
Meeting corporate tax filing deadlines is imperative for businesses to ensure compliance with regulatory requirements. It involves a strategic approach, beginning with the timely collection of financial data, accurate selection of the appropriate ITR form, and thorough preparation of necessary documents. Engaging with tax professionals or using reliable online platforms can streamline the process, helping companies meet deadlines for tax filing, which vary based on the nature of the business and the requirement for audits or specific reports.
As per the Income Tax Rules, failing to file an ITR by the deadline may result in a penalty of ₹10,000 as well as additional repercussions. Under Section 234A of the Income Tax Act of 1961, interest on the tax due may also result from a delay in filing an ITR.
Importance of Professional Assistance in Corporate Tax Filing
Professional assistance is indispensable in corporate tax filing due to the intricacies of tax laws and their constant evolution. This is where Vakilsearch scores, our tax experts can help you in the following ways:
- Our tax experts ensure accurate and compliant filings, helping businesses maximise deductions, minimise errors, and strategically plan for tax efficiency
- Beyond compliance, professionals offer audit support, legal compliance, and customised advice, providing businesses with the expertise needed for optimal financial management and peace of mind in their tax-related endeavours
- This not only saves time and resources but also positions companies to navigate the complexities of tax regulations with confidence.
Tax Rebates for Corporate Tax Filing
Tax rebates for businesses encompass various procedures and exemptions akin to the diverse taxes imposed on entities. Below are key considerations regarding company tax rebates:
- Under certain circumstances, interest income may be eligible for write-offs
- Corporations enjoy exemption from taxes on their capital gains
- Dividends can qualify for a tax rebate, subject to the terms and conditions (T&Cs)
- Companies have an eight-year window to offset their losses
- Installation of additional facilities or electricity supplies may render a corporation eligible for specific deductions
- Corporate exports and new business ventures are entitled to a designated amount of exemptions.
- Provision for exclusions can be made when investing in venture capital companies or funds
- Domestic businesses have the option to deduct specific amounts of dividends received from other domestic corporations as rebates.
Corporate Tax Return Filing FAQs
Is it mandatory to file ITR for a company?
Yes it is crucial to file corporate tax returns on time to avoid penalties and legal action.
What is the due date for filing a corporate tax return?
The due date for filing corporate tax returns in India is October 31.
What happens if a company does not file ITR?
If the company fails to file ITR it might face penalties and litigation
What are the penalties for late filing or incorrect filing of corporate taxes?
The penalty for delayed filing of income tax returns by companies varies based on the timing. Filing after the due date but before December 31 incurs a ₹5,000 penalty. If filed between December 31 and March 31 of the assessment year, the penalty rises to ₹10,000. Any filings after March 31 result in a substantial penalty of ₹1,00,000, emphasising the importance of timely compliance with the Income Tax Department's regulations.
How does the tax filing process differ for different corporate structures (e.g., sole proprietorship, LLC, corporation)?
The forms that are required to file greatly vary. For more detailed information consult our tax experts today.
Are there any recent changes in tax laws that businesses need to be aware of during filing?
For more recent updates, get in touch with our tax experts today.
Can a business carry forward losses or credits to future tax years?
Yes it Can be carried forward up to next 8 assessment years from the assessment year in which the loss was incurred Can be adjusted only against Income from business or profession. Consult a tax expert to resolve this query.
Should businesses consider hiring a professional tax preparer or use tax software for filing?
It is not mandatory but it is highly advisable to consult a tax expert before filing your corporate tax. If you are not able to hire a full time tax expert, get in touch with our team to file your corporate returns on time.
How can businesses plan ahead to minimise their tax liability during tax filing?
By consulting senior tax experts you might find proper advice on tax saving.
What are the implications of international operations on corporate tax filing?
If your firm is involved in international operations then the due date for corporate tax filing varies.
What is the process for filing amended tax returns for corporations?
- Go to the 'e-File' menu and click on the 'Rectification' link
- Choose options for 'Order/Intimation to be rectified' and 'Assessment Year' from the dropdown list
- Click 'Continue.'
- On the Income Tax Return Page, your PAN will be auto-populated.
- Select 'Assessment Year,' 'ITR Form Number,' and 'Filing Type' as 'Original/Revised Return.'
- Set 'Submission Mode' to 'Prepare and Submit Online.'
- Click 'Continue.'
- Read the instructions carefully and fill all applicable and mandatory fields in the Online ITR Form.
What is the MAT (Minimum Alternate Tax)?
The Income Tax Act of India contains a provision known as the Minimum Alternate Tax (MAT), which mandates that businesses with significant book profits pay a minimum amount of income tax.
Is India's corporate tax rate high?
The current corporate tax rate in India is 33.99% for domestic companies whose net income is more than ₹10 crore. When compared globally, this tax rate is among the higher ones, yet not the highest.
Authors
Written by Akash, Reviewed by Anakha. Last updated on May 27 2024, 11:42 AM
S J Anakha, BBA.LLB. (Hons.), specializes in various legal disciplines including GST advice, tax-saving strategies, ITR filing, and LLP annual compliance. With her expertise, she provides valuable guidance to clients across diverse industries.
Akash G Varadaraj, a legal content writer at Vakilsearch, brings over 3 years of experience in the legal niche. His mission is to simplify complex legal matters into understandable terms even for a layman. Collaborating closely with senior lawyers and SMEs, he ensures the delivery of top-notch content.
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