Corporate Tax Rate In India


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How Is Tax On Dividends Applicable To Nri

India Slashes corporate tax rate

When it comes to Non-Resident Indians a TDS of 20% is deducted. But this is subject to the Double Taxation Avoidance Agreement . In such a situation if the Indian government has a tax treaty with the other country the individual is residing in, it can be used to avoid taxing their income twice. The first being at source and the second being the country of residence.

In this case, NRIs have to submit the Form 10F, declaration of beneficial ownership, certificate of tax residency among others to avoid their income being taxed twice.

Corporate Tax Rate For Domestic Companies

  • If the company has a total income less than Rs. 1 crore, then it does not have to pay any income tax.
  • If the net income of the company for that year is in the range of Rs. 10 crore then 5% surcharge is applied on its net income.
  • If the net income of the company for that year exeeds Rs. 10 crore then 10% surcharge is applied on its net income

Background: Indias Corporate Tax Provisions

Prior to economic liberalisation in 1991, the base corporate tax rate for a domestic Indian company was as high as 50%. Over a period of time, the Income-Tax Act, 1961 has brought down the base corporate tax rate for Indian companies to 30%. However, the effective tax rate is higher due to applicability of a surcharge and education cess in the last decade, the effective tax rates for Indian companies have broadly been in the range of 31% to 35% depending on their level of taxable income.

Actual tax payments of Indian companies often do not reflect the headline rate of tax, as various tax holidays, exemptions, and deductions are available based on the activity or the geographical area where activities are undertaken. To ensure that companies with low or nil taxable income based on tax exemptions or special deductions pay some tax, a Minimum Alternate Tax1 rate of 18.5%, exclusive of surcharge and cess, is applied to book profits when the M.A.T. yields greater tax than the amount due under normal corporate income tax provisions. The excess of M.A.T. over the normal tax calculation can be offset in future years where tax under the normal provisions is higher than M.A.T.2 This offset amount is popularly known as M.A.T. Credit.

However, the total tax payable by companies and their shareholders is not limited to the normal corporate tax or M.A.T., if applicable. Additional taxes are payable once profits are distributed to shareholders as explained below:

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Scheduled Corporate Tax Rate Changes In The Oecd

Among Organisation for Economic Co-operation and Development countries, Austria, France, the Netherlands, and the United Kingdom, have announced they will implement changes to their statutory corporate income tax rate over the coming years.

  • In Austria, the corporate income tax rate will be cut from 25 percent to 23 percent starting in 2024. The government is also considering increasing the tax exemption threshold on profits up to 30,000 from 13 percent to 15 percent.
  • In France, the standard statutory corporate income tax rate was lowered to 32.02 percent in 2020. An already legislated corporate rate reduction is expected to progressively bring down the corporate tax rate to 25.83 percent by 2022.
  • In the Netherlands, the originally planned reduction of the statutory corporate tax rate applying to income exceeding 200,000 was reversed: The corporate rate was not decreased to 22.55 percent in 2020 as originally planned. Instead, it remains at 25 percent in 2021 and will not be lowered to 21.7 percent. However, the higher tax bracket is being increased from 245,000 in 2021 to 345,000 in 2022.
  • In the United Kingdom, the standard statutory corporate income tax rate is due to increase from 19 percent to 25 percent on April 1, 2023.

Corporation Tax In India

What The Corporate Tax Cuts Mean For India, In Four Charts
  • Corporate tax is applicable on those entities which have a separate legal entity from its founders and have been formed under the Companies Act, 2013 or any previous Companies Act.
  • The corporate tax rate for foreign companies depends upon the tax agreement between India and the origin country of the concerned company.
  • Companies hire professionals for effective Corporate Tax Planning. These professionals strategize company financials to reduce the tax and increase profit well within the tax and financial laws.

Recommended Reading: Local County Tax Assessor Collector Office

Federal Corporate Income Tax Rate

First things first: what is the federal corporate tax rate? The current corporate tax rate is 21%, thanks to the Tax Cuts and Jobs Act of 2017.

Prior to the Tax Cuts and Jobs Act, there were taxable income brackets. The maximum tax rate was 35%.

The corporate tax rate applies to your businesss taxable income, which is your revenue minus expenses .

Federal Corporate Tax Rate Example

Lets say you have annual revenues of $250,000 and qualifying expenses of $55,000. You want to figure out how much you owe in federal taxes.

First, subtract your expenses from annual revenues:

Taxable Income = $250,000 $55,000

Next, multiply the federal corporate tax rate of 21% by your taxable income:

$195,000 X 0.21 = $40,950

You would owe $40,950 in federal corporate taxes.

India Tax Position On The Multilateral Instrument

India signed the MLI in June 2017. The Indian Government approved the ratification of the MLI on 13 June 2019, and India deposited the ratification instrument along with its final MLI position on 25 June 2019. The date of entry into force for India is 1 October 2019, and the date of entry into effect for India is 1 April 2020. The following tax treaties have been amended to date pursuant to the effect of the MLI.


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Conditions Specified Under Eligibility Criteria Of Section 115baa

All domestic companies shall have an option to pay income tax at the rate of 22% , provided the following conditions are complied with:

  • Such companies should not avail any exemptions/incentives under different provisions of income tax. Therefore, the total income of such company shall be computed without:
  • Claiming any deduction especially available for units established in special economic zones under section 10AA
  • Claiming additional depreciation under section 32 and investment allowance under section 32AD towards new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal
  • Claiming deduction under section 33AB for tea, coffee and rubber manufacturing companies
  • Claiming deduction towards deposits made towards site restoration fund under section 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India
  • Claiming a deduction under Section 35 for expenditure on scientific research, or an amount paid to a university or research association or National Laboratory or IIT.
  • Claiming a deduction for the capital expenditure incurred by any specified business under section 35AD
  • Claiming a deduction for the expenditure incurred on an agriculture extension project under section 35CCC or on skill development project under section 35CCD
  • There is no restriction on turnover and the company need not be a new company, any existing company can migrate into this section at any point.
  • Corporate Tax In India

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    A corporate is an entity that has a separate and independent legal entity from its shareholders. Domestic as well as foreign companies are liable to pay corporate tax under the Income-tax Act. While a domestic company is taxed on its universal income, a foreign company is only taxed on the income earned within India i.e. is being accrued or received in India.

    For the purpose of calculation of taxes under Income tax act, the types of companies can be defined as under:

    • Domestic Company: Domestic company is one which is registered under the Companies Act of India and also includes the company registered in the foreign countries having control and management wholly situated in India. A domestic company includes private as well as public companies.
    • Foreign Company: Foreign company is one which is not registered under the companies act of India and has control & management located outside India.

    Also Check: How To Find 2020 Tax Return

    Petrol Price In Delhi Stands Firm At Rs 9672 Per Litre And Diesel Rate At Rs 8962 Per Litre According To Oil Marketing Companies

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    The petrol and diesel prices remain steady on Sunday . Since May 21, the rates have remained unchanged after the central government cut down the excise duty on fuel prices. The petrol price was deducted by Rs 8 per litre and diesel came down by Rs 6 per litre. Last month, the Maharashtra government reduced the value-added tax on petrol and diesel by Rs 5 and Rs 3 per litre, respectively.

    Even after a reduction in prices by the Centre, many states still observe sky-rocketing prices with petrol selling at more than Rs 100 per litre. Except for a few cities like Delhi and Bengaluru, the diesel prices in major cities remain above Rs 90 per litre. With the hike in fuel rates, middle-class families continue to face financial hardship.

    According to oil marketing companies , the petrol price in Delhi stood firm at Rs 96.72 per litre and the diesel rate is Rs 89.62 per litre on Sunday. The revised petrol and diesel prices in Mumbai are Rs 106.35 per litre and Rs 94.28 per litre, respectively. In Kolkata, petrol is at Rs 106.03 per litre and diesel is sold at the rate of Rs 92.76 per litre. The costs of petrol and diesel are Rs 102.63 and Rs 94.24 per litre, respectively, in Chennai.

    Check out fuel rates in Delhi, Mumbai and others on Sunday :


    Petrol: Rs 96.72 per litre

    Diesel: Rs 89.62 per litre


    Petrol: Rs 106.31 per litre

    Diesel: Rs 94.27 per litre


    Petrol: Rs 106.03 per litre

    Diesel: Rs 92.76 per litre


    Petrol: Rs 102.63 per litre


    State C Corp Tax Rates

    Most states set a corporate tax rate in addition to the federal rate. State corporate income tax rates range from 0% 9.99%. But, not all states levy a corporation tax rate.

    The following states do not have a state corporate tax rate:

  • Nevada
  • Washington
  • Wyoming
  • Nevada, Ohio, Texas, and Washington levy gross receipts taxes on corporations instead of corporate taxes. A gross receipts tax is a tax on a businesss gross receipts, which includes the businesss total revenue without deductions .

    South Dakota and Wyoming do not have state corporate income taxes at all.

    Keep in mind that some states have both corporate income tax and gross receipts tax.

    Some states apply a flat tax to all corporations while others use brackets. The states with brackets apply tax rates based on the corporations taxable income.

    Use the chart below to find corporate tax rates by state:


    Read Also: Free Irs Approved Tax Preparation Courses

    Tax Collected At Source On Sale Of Goods

    The Finance Act, 2020 has introduced provisions for TCS on sale of goods at the rate of 0.1% on transactions for sale of goods exceeding INR 5 million effective from 1 October 2020. These provisions are applicable only if the turnover/gross receipts of the seller in the immediately preceding year do not exceed INR 100 million. Further, where PAN/Aadhar is not provided by buyer, tax will be collected at the rate of 1%. This provision will not apply where the seller exports goods out of India or the buyer is importing goods into India or the said transaction is already covered under any other provision of tax laws.

    How Do Corporation Taxes Work

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    A corporation, or C Corp, is a type of business structure where owners enjoy limited liability protection. Corporations are separate legal entities, meaning they are separate from their owners. Owners are not responsible for their corporations actions and debts .

    But because corporations are separate legal entities, they are subject to double taxation. The company itself pays taxes on its earnings and the owner also pays taxes. In other business structures , taxes pass through to the owner so they only pay taxes on earnings once.

    If you own a corporation, report its profits and losses on Form 1120, U.S. Corporation Income Tax Return. And, report your personal income on your individual tax return.

    Corporations are generally taxed at both the federal and state level. When a corporation pays taxes on its taxable income, it must pay at a rate set by both the federal and state levels.

    So if you structure as a corporation, you need to know the corporation tax rates.

    Read Also: Sale Of Second Home Tax Treatment

    Reduced Rate Of Tax For Newly Set

    A beneficial CIT rate of 15% with effect from tax year 2019/20 for newly set-up domestic manufacturing companies can be availed. The benefit of concessional tax rate of 15% has been extended to domestic companies engaged in the business of generation of electricity from tax year 2020/21.

    The beneficial rate of 15% can be exercised at the option of the company and is applicable on satisfaction of the following conditions, cumulatively:

  • The company is incorporated on or after 1 October 2019 and commences manufacture or production of any article or thing on or before 31 March 2023.
  • The ‘business’ is not formed by splitting up or reconstruction of business already in existence .
  • Does not use plant and machinery previously used for any purpose in India, and no depreciation has been claimed on the same.
  • Does not use any building previously used as a hotel or convention centre for which deductions under provisions of the Income-tax Act have been claimed or allowed.
  • The company is not engaged in any business other than the business of manufacture or production of any article or thing and research or distribution of such article or thing manufactured or produced. The following businesses will not be treated as business of manufacture or production of any article or thing:
  • Development of computer software in any form or in any media.
  • Conversion of marble blocks or similar items into slabs.
  • Bottling of gas into cylinder.
  • Printing of books or production of cinematograph films.
  • Iv For All Existing Domestic Companies

    Income Tax Rate: 22% A.Y. 2021-2022 and A.Y 2022-2023.

    Surcharge: 10% of taxable income if net income exceed 1 crore. Health and Education Cess: 4% of Income Tax plus Surcharge

    Note -I : Following conditions need to be satisfied for getting benefit of lower tax rate introduced by Section 115BAA:

    a. without claiming exemption/ deduction u/s

    i. 10AA ,

    ii. u/s 32 ,

    iii. u/s 32AD

    iv. u/s 33AB

    v. u/s 33ABA

    vi. u/s 35/

    vii .u/s35

    viii. u/s 35AD

    ix. u/s 35CCC

    x. u/s 35CCD

    xi. under Part C of Chapter VIA except section 80JJAA and sec 80 M of the Act

    b. Without set-off of any brought forward losses to the extent such loss relates to deductions mentioned above. Such losses would also not be allowed to be carried forward to subsequent years.

    c. After claiming depreciation other than additional depreciation u/s 32

    Benefit of lower rate under the aforesaid section can be exercised by the company from any year commencing from AY 2020-21 or onwards. Such option is to be exercised in prescribed manner, before due date of return u/s 139 for the year in which option is exercised. Option once exercised would be binding for subsequent years and cannot be withdrawn.

    Companies availing benefit of lower tax rate under new provisions of sections 115BAA/ 115BAB have been exempted from MAT on book profit under section 115JB.

    Read Also: Amended Tax Return Deadline 2020

    Reduced Rate Of Tax For Certain Existing Domestic Companies

    A beneficial CIT rate of 22% can be availed with effect from tax year 2019/20. This beneficial rate is at the option of the company and is applicable on satisfaction of the following conditions, cumulatively:

  • The company has not claimed a tax holiday available to a unit in a Special Economic Zone , benefit of accelerated depreciation, or benefit of additional depreciation, investment allowances, expenditure on scientific research, and any deduction in respect of certain income other than deduction in respect of employment of new employees and deduction of certain income of Offshore Banking Units and International Financial Service Centre.
  • The company has not claimed set-off of loss and unabsorbed depreciation carried forward from any earlier years including set-off of any unabsorbed depreciation and losses relating to loss/depreciation on amalgamation, provided such loss is attributable to the deductions referred to in above. However, the corresponding adjustment in written down value of such block of asset as on 1 April 2019 will be allowed in the prescribed manner.
  • The option of seeking the benefit of a reduced CIT rate of 22% is furnished in the prescribed manner before the due date of furnishing of income.
  • Companies exercising this option have been excluded from the applicability of provisions of minimum alternate tax and MAT credit.
  • Advantages Of A Corporate Tax

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    Paying corporate taxes can be more beneficial for business owners than paying additional individual income tax. Corporate tax returns deduct medical insurance for families as well as fringe benefits, including retirement plans and tax-deferred trusts. It is easier for a corporation to deduct losses, too.

    A corporation may deduct the entire amount of losses while a sole proprietor must provide evidence regarding the intent to earn a profit before the losses can be deducted. Finally, profit earned by a corporation may be left within the corporation, allowing for tax planning and potential future tax advantages.

    Corporate Tax Rates In 2021

    In 2021, 20 countries changed their statutory corporate income tax rates. Three countries increased their corporate tax rates: Bangladesh, Argentina, and Gibraltar. Bangladesh raised its rate from 25% to 32.5% Argentina’s from 30% to 35%, and Gilbratar’s from 10% to 12.5%. Seventeen countries decreased their corporate tax rates: Sweden, Colombia, Switzerland, Monaco, Congo, Turkey, Indonesia, France, Gambia, Lao People’s Democratic Republic, Sri Lanka, Angola, the Democratic Republic of the Congo, Bhutan, Kiribati, Tunisia, and Chile. These countries decreased their rates from just under 1% in Sweden to a 15% reduction in Chile.

    Comoros has the highest corporate tax rate globally of 50%. Puerto Rico follows at 37.5%, and Suriname at 36%. Excluding jurisdictions with corporate tax rates of 0%, the countries with the lowest corporate tax rates are Barbados at 5.5%, Uzbekistan at 7.5%, and Turkmenistan at 8%. Fifteen countries do not have a general corporate income tax. Those countries are Anguilla, the Bahamas, Bahrain, Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Isle of Man, Jersey, Saint Barthelemy, Turks and Caicos, the United Arab Emirates, Vanuatu, and Wallis and Futuna Islands.

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