Taxes play a valuable role in the growth of any country. In India, the taxation system is divided into two components- direct and indirect taxes. One of the biggest examples of direct tax is the income tax paid by individual taxpayers of the country.

Similarly, companies also pay direct tax in the form of corporate tax. Let us have a look at what it is and how it works.

What is Corporation Tax?

As mentioned above, corporate or corporation tax is the tax paid by entities that are registered as companies under the Indian company law. It applies to domestic as well as foreign companies operating in India. The tax is based on the net profit generated by a company in a financial year.

What is Corporate Tax Rate?

Now that you know what corporate tax is, let us have a look at the tax rates.
The IT department adjusts the corporate tax rate every year. For the assessment year 2019-20, the corporate tax rates for domestic companies are as follows-

Gross Turnover Corporate Tax Rate
Up to Rs. 250 crores 25%
Above Rs. 250 crores 30%

For foreign companies, the corporate tax rates in India depend on the taxation agreements made between India and the home country of the company.

Are There Any Additional Taxes Apart from Corporate Tax?

In addition to the corporate tax rates discussed above, there are also several additional taxes that a company is required to pay. Some of the most important ones are as follows-

Particulars Applicable Tax Rate
Surcharge i) Total income between Rs. 1 crore to Rs. 10 crores- 7% of the calculated tax for domestic companies and 2% of the calculated tax for foreign companies ii) Total income above Rs. 10 crores- 12% of the calculated tax for domestic companies and 5% of the calculated tax for foreign companies
Health and Education Cess 4% of the calculated tax
Minimum Alternate Tax or MAT If the calculated tax rate of a domestic or foreign company is less than 18.5% of their book profits, it is required to pay corporate tax at a fixed rate of 18.5%
Dividend Distribution Tax or DDT Companies are also required to pay DDT at the rate of 20.56% on the dividends they pay to their shareholders

Corporate Taxation in India

Corporate taxes in India come with a host of provisions for domestic and foreign companies.
While companies can make use of such provisions to reduce their tax liabilities, they should not misuse them to evade taxes. Tax evasion is a crime and could lead to serious financial and legal obligations for companies.

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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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