Corporate Tax

The Income Tax Act of 1961 provides a provision wherein tax can be levied on the companies for a certain period depending on their profits earned as well as the nature of the business. These tax rates are charged on both domestic and foreign companies.

Here is the list of corporate entities that are liable to pay corporate tax in India:

  • The corporations incorporated in India
  • Foreign corporations that generate revenues from India and use those revenues to conduct business on those earned incomes
  • Other foreign companies that are permanently established in India
  • Enterprises that are treated as Indian residents only for the purpose of tax payment

The companies can be classified into the following categories:

Domestic company – A company registered under the Companies Act of India, 1956 or a foreign company that has its control and management wholly situated in India.

Foreign company – A foreign company is the one that does not have any Indian origin and has some part of its control and management located outside India.

The income on which tax can be levied includes the following:

  1. Profits earned from the business
  2. Capital gains
  3. Income from renting properties
  4. Income from other sources like dividend, interest etc.

Corporate Tax Rates

For Domestic Companies

Range of income Rate of tax
Gross turnover of up to ₹250 crores 25%
Above Rs. 250 crores 30%

For Foreign Companies

Nature of Income Tax Rate
Royalty received or fees for technical services from government or any Indian concern 50%
Any other income 40%

In addition to the aforementioned tax rates, there are
  • Surcharges
  • Cess on health & education
  • Minimum Alternate Tax (MAT) - introduced to facilitate ‘Zero Tax Companies’ to avoid tax
  • Dividend Distribution Tax (DDT

Other details

  1. The Corporate Income Tax has to be filed on or before September 30 every fiscal year.
  2. Types of tax return forms used for filing Corporate Income Tax –
    • ITR 6 – This form is used by all the companies apart from those claiming deduction under Section 11.
    • ITR 7 – This form is used by companies registered under the Companies’ Act, 2013, Section 8.
  3. According to the Indian Income Tax Act, a specific class of companies have to submit a Tax Audit Report along with the Income Tax return. This too has to be done on or before September 30 of every fiscal year.
The Corporate Income Tax structure in India has various provisions, regulations and guidelines with respect to taxation and rebates. Companies should go through the details with their taxation experts to get a clear understanding of their tax liabilities to avoid incorrect filing and future hassles.

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DISCLAIMER

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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