Corporate Tax
Corporate Tax
Understanding and managing corporate tax is crucial for any business operating in India. With evolving tax laws and frequent updates announced in Union Budgets, businesses must stay informed and compliant to avoid penalties and ensure smooth operations.
We specialize in offering end-to-end corporate tax services tailored to the needs of domestic companies, startups, and multinational corporations. Our goal is to simplify taxation while maximizing your tax efficiency.
What is Corporate Tax?
Corporate tax is a direct tax imposed by the Government of India on the net income or profit of corporations and companies. These taxes are calculated after deducting allowable business expenses and are payable annually.
It applies to:
• Domestic Companies (incorporated in India)
• Foreign Companies (operating or earning income in India)
Corporate Entities: Definitions and Types
1. Domestic Company – A company registered under Indian laws and whose management and control are wholly in India.
2. Foreign Company – A company registered outside India but has operations or income sourced from India.
3. LLP – Although taxed differently, some provisions apply similar to corporate taxation.
4. Startups and SMEs – Special provisions and benefits are available under various startup schemes.
Corporate Tax Rates in India (As per Budget 2024)
The Union Budget 2024 maintained the existing corporate tax structure:
Domestic Companies:
Temporary Staffing vs. Full-time Hiring
| Company Type | Tax Rate | Conditions |
|---|---|---|
| Normal Domestic Companies | 30% | Turnover > ₹400 Cr |
| Small Domestic Companies | 25% | Turnover ≤ ₹400 Cr |
| New Manufacturing Companies (115BAB) | 15% + cess | Registered after Oct 1, 2019 |
| Companies Opting Section 115BAA | 22% + cess | No exemptions allowed |
Foreign Companies:
| Type | Tax Rate |
|---|---|
| Royalties/Fees for Technical Services | 50% |
| Other income sourced in India | 40% |
Additional charges include:
• Surcharge: 7%-12% depending on income
• Health & Education Cess: 4% on tax + surcharge
Types of Corporate Taxes
1. Minimum Alternate Tax (MAT) – Applies to companies availing tax exemptions, at 15% of book profits.
2. Dividend Distribution Tax (DDT) – Abolished in 2020; now dividends are taxed in the hands of shareholders.
3. Advance Tax – Must be paid if the tax liability exceeds ₹10,000 in a year.
4. Self-Assessment Tax – Paid after adjusting advance tax and TDS while filing returns.
5. Tax on Presumptive Income – For eligible businesses under Section 44AD and 44ADA.
Corporate Tax vs. Income Tax
| Feature | Corporate Tax | Income Tax |
|---|---|---|
| Applicability | Companies | Individuals, HUFs, Firms, etc. |
| Tax Rates | Fixed (22%, 30%, etc.) | Slab-based (5%, 10%, 30%, etc.) |
| Deductions | Limited (especially under 115BAA/BAB) | Broad deductions and exemptions |
| Reporting Requirements | More complex and detailed | Relatively simpler |
Common Mistakes to Avoid While Filing Corporate Tax
1. Failure to reconcile TDS and Advance Tax
2. Overlooking tax credits or deductions
3. Missing tax payment deadlines
4. Filing returns under incorrect ITR forms
5. Neglecting compliance with new tax regimes
FAQs on Corporate Tax in India
1. What is corporate tax and who pays it?
Corporate tax is a direct tax levied on the profits of companies operating in India. It is paid by:
• Domestic companies (registered in India)
• Foreign companies earning income from India
2. How is corporate tax different from income tax?
Corporate tax is applicable to business entities like companies, while income tax is mainly for individuals, HUFs, and non-corporate entities. Corporate tax rates are usually fixed or based on special provisions, while income tax is often slab-based.
3. What is MAT (Minimum Alternate Tax)?
MAT ensures that companies paying little or no tax due to exemptions still contribute at least 15% of their book profit. It applies mainly to companies claiming significant deductions.
4. What documents are required to file corporate tax returns?
Typically, you’ll need:
• PAN & CIN
• Audited financial statements
• Tax audit report (if applicable)
• TDS and advance tax challans
• Bank account details
• Transfer pricing documents (if applicable)
We handle document collection and return filing end-to-end for our clients.
5. Can I revise a corporate tax return after filing?
Yes, revised returns can be filed before the end of the relevant assessment year or completion of assessment, whichever is earlier. However, frequent revisions may raise flags with the tax department.
6. Is e-filing mandatory for corporate tax returns in India?
Yes. All companies must e-file their income tax returns using digital signatures on the Income Tax e-filing portal. Manual filing is not permitted for companies.
7. Which ITR form should a company use to file its return?
• Most companies (except those claiming exemptions under section 11) must use ITR-6.
• Companies registered under Section 8 (non-profits) use ITR-7.
We help ensure the correct ITR form is used to avoid processing delays and rejections.
8. How does corporate tax apply to foreign companies?
Foreign companies are taxed on:
• Income earned or accrued in India
• Royalties, fees for technical services, or income through Indian branches
A Double Taxation Avoidance Agreement (DTAA) may reduce the effective tax rate. We offer international tax advisory to manage cross-border taxation.
9. What is transfer pricing and when does it apply?
Transfer pricing rules apply when your company transacts with related foreign entities. Pricing must be at arm’s length, and you need:
• Transfer Pricing Study Report
• Accountant’s Report (Form 3CEB)
10. How are corporate losses treated for tax purposes?
• Business losses can be carried forward for 8 years and set off against future profits.
• Unabsorbed depreciation can be carried forward indefinitely.
11. Can a company revise its return more than once?
Yes, a return can be revised multiple times before the end of the assessment year or before assessment is completed—whichever is earlier. Accuracy is key; frequent changes may raise compliance concerns.
12. Can I change my tax regime every year?
Companies can opt into Section 115BAA or 115BAB only once, and the decision is irreversible. Individuals/HUFs can switch between old and new regimes annually, but companies cannot.
13. How do startups qualify for 100% tax exemption under Section 80-IAC?
Startups must:
• Be recognized by DPIIT
• Be incorporated between April 1, 2016, and March 31, 2025
• Have turnover over ₹100 crore
• Apply for Form 1 approval and meet innovation/technology criteria
14. Can I carry forward MAT credit?
Yes. If a company pays MAT (Minimum Alternate Tax) in excess of regular tax, the difference is allowed as MAT Credit, which can be carried forward for 15 years and set off against future tax liability (not against MAT).
15. What is Equalisation Levy and who needs to pay it?
Applicable to Indian companies paying for online advertising, cloud services, or digital platforms (like Google Ads, Facebook, AWS).
• 6% on online ad payments to non-residents
• 2% on e-commerce supply or services from abroad (if turnover > ₹2 crore)
We manage your equalisation levy compliance and reporting (Form 1 filing).
