Owning a business comes with its own share of challenges. One of the most important of them being the income tax. While calculating taxes on business income can be as easy as using an online income tax business calculator, it is essential to at least know the basics of how business income is taxed in India.

If you already own a business or planning to start one, here are some of the most important things you should know about business income tax-

Business Tax Provisions

To start with, you first need to know the taxable income of your business. Normal provision and presumptive taxation are two different ways in which you can calculate the taxable business income. With normal provision, the taxable income is calculated by deducting the cost of sold goods and expenses from the total sales.

With presumptive taxation, your taxable income is a fixed percentage of your total sales. However, as per income tax for business rules in India, the presumptive taxation scheme is only available for businesses with a turnover of more than Rs. 2 crores.

Tax Rate for Businesses

The next step is to check the income tax slab you fall under. There are multiple tax slabs in three categories- for people under 60 years, seniors between 60 to 80 years and super seniors above 80 years. The slab rates vary under these categories.

For instance, if you own a business and are below 60 years, your income tax for business in India will be based on these slabs-
  • Income up to Rs. 2.5L- NIL
  • Income between Rs. 2.5-5L lakh- 5%
  • Income between Rs. 5-10L- 20%
  • Income above Rs. 10L - 30%

Surcharge and Cess 

If your annual income is between Rs. 5L to Rs. 1 crore, you will have to pay a surcharge of 10% above the income tax on business. If it is above Rs. 1 crore, the surcharge will be 15%. There is also an additional Health and Education cess of 4%.

If you have a Limited Liability Partnership or a Firm, you will be taxed at 30% if your taxable income is up to Rs. 1 crore. For a Company, the tax rate is 30% but if your turnover is less than Rs. 250 crores, the tax rate will be 25%.

The details mentioned above are very basic in nature and should be known by every business owner. While you can do the basic business tax calculations with an income tax small business calculator, it is essential to hire professional help for knowing your exact tax liabilities.


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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