Corporate Tax in India


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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 categorised 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 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 are a crucial democratic check on excessive corporate power.

List the Various Business Categories and Income Liable for Corporate Tax in India.

The income generated by both domestic and foreign enterprises are subjected to corporate tax in India. Worldwide profits of the companies listed in the state are subject to this tax. While only the earnings made or accrued in India are subject to corporate taxes in the case of multinational firms.

Domestic corporation: A domestic corporation is a business that was founded in India or any other international company with sole management and control is based in India. Being an Indian citizen entails having a Companies Act license. Any company that is owned and operated outside of India is not an Indian corporation.

Tax Penalty Assessment

Based on its residential status, the company's income tax liability is determined. If a business is an Indian corporation or has its administration and control here, it is regarded as a resident of India. On all of their revenue, residents are obligated to pay business tax.

Corporation Taxes

In exchange, the issue of double taxation can appear. Due to the differing tax laws in different countries, the corporation is taxed on the same income twice. I.T. Sections 90 and 91 provide protection from double taxation.

Component of a Company’s Income

The following are included in the total revenue of a business that is subject to corporate tax in India :

  • Company and professional perks and gains
  • Capital gains
  • Profits from residential properties
  • Income derived from several sources
  • Shares
  • Jackpots

As per Section 79 adjustments are made to the computed income, company losses are carried forward, and gross income is calculated. The net income is calculated after deducting Chapter VI-A expenses from the total gross revenue. Taxes are owed on the computed value of net income.

Checklist for Corporate Tax in India

When filing for a corporate tax in India, the following information must be provided:

Information of 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
  • Employe 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
  • Traveling 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

Corporate Tax Rate in India

The corporate tax rate in India for domestic companies in AY 2020-21 is displayed below.

SectionsTax rateSurcharge
Section 115BA (corporations with a highest annual revenue of ₹400 crore in FY 2017–18)25%7%/12%*
Section 115BAA22%10%
Section 115BAB15%10%
Any other case30%7%/12%*

*plus a surcharge in the event that a corporation is subject to section 115BA tax. When the total income exceeds ₹1 crore and is between one crore and ₹10 crore, there is a 7% surcharge. If your overall income is more than ₹10 crore, there is a 12% surcharge. However, the surcharge is 10% regardless of the total income if a firm chooses to be taxed under sections 115BAA or 115BAB.

For AY 2020–21, the following income tax rate for companies is collected based on their turnover.

Nature of IncomeTax 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 government50%
Any extra income40%
ParticularsTax rate
If cumulative income exceeds ₹1 crore but not ₹10 Crore7% of tax calibrated on domestic firm
2 % of tax calibrated on foreign company as per the rates mentioned above
If the total revenue surpasses ₹10 crore12% of tax is collected from domestic company
5 % of tax is collected on foreign company as per above rates

He'sness 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 2022-2023

Income tax companies with a 2019–2020 turnover or gross receipts up to ₹400 crores, at a 25%. Corporate Tax rate in India for companies with a turnover or gross receipts exceeding ₹400 crores and an 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. 2022-23.

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