Corporate tax rate in India

Corporate tax rate in India

The corporate tax in India is imposed on both foreign companies as well as domestic corporations. The concept is much similar to individual taxpayers paying taxes from their incomes, likewise the companies too are required to pay certain portion of their income as tax.  This type of tax is known as called corporate tax, corporation tax or company tax.

Corporation tax rate in India in the assessment year 2019-2020

The corporate tax rate in India differs from one type of corporation to another that is domestic companies and foreign companies in order to pay tax at different rates. Also, on relying on the type of corporate firm and the different revenues made by each of them, the rate of corporation tax also varies considering the slab rate system. Currently, for the assessment year 2019-2020, the corporation tax rates are

Company TypeCorporate Tax RateSurcharge on Net Income below  Rs. 1 croreSurcharge on Net Income above Rs. 1 Crore and below Rs. 10 CroreSurcharge on Net Income above Rs. 10 Crore
Domestic corporation with annual turnover up to Rs 250 Crore25%Nil7%12%
Domestic corporation with turnover above Rs 250 Crore30%Nil7%12%
Foreign Corporations40%Nil2%5%

If the total revenue made by a domestic corporation is greater than Rs. 1 crore, but not Rs. 10 crore, then a surcharge corporate tax of 7% is imposed on domestic company

A domestic company with a turnover up to Rs. 250 Crore pays a corporate tax @ of 25%; whereas corporations with a gross turnover of above Rs.250 crore are legally responsible to pay the corporate tax at 30%.Corporation Tax Rates for a Domestic Company in India
A Domestic company is a corporation which has an Indian origin and whose administration is situated completely in India. The corporate tax rate for AY 2019-20 for domestic corporations are:

If total income exceeds Rs. 10 crore, then a surcharge corporate tax of 12% is imposed on the domestic company

If a specific domestic corporation has its branches abroad, the same sum of corporate tax is also levied on the entire global earnings of such a corporation. Corporate tax for domestic corporations in India therefore also considers the income that is made by a domestic corporation overseas.

Corporation Tax Rates for a Foreign Company in India

A foreign Company is defined as a corporation who does not have an Indian origin and its administration and control take place out of India. These companies are not registered under the Companies Act 2013. The rules relating towards the taxation procedure for a foreign corporation is totally different from that of a domestic company. It hinges on the taxation agreement that is made amid India and other foreign nations. Like for instance, for foreign corporation based out of the US would depend on the taxation agreement that India has made with the United States.

The rates that are applicable to foreign corporations for AY 2019-20 based on their turnover are:

Nature of IncomeTax Rate
The received Royalty or the fees for technical services from government or any Indian concern under an agreement which was made before 1st April 1976 and  approved by central government40%
Any other income50%

A Health and Educational Cess at 4% is also been charged for a domestic corporation. In addition to above corporate tax rates: If the total revenue made by a foreign corporation is greater than Rs. 1 crore but not Rs. 10 Crore then a surcharge corporate tax of 2 % of tax calculated on foreign company as per the above rates 

If total income is above Rs. 10 crore, then a surcharge corporate tax of 12% is imposed on the foreign corporation.

Also, all the corporations (which includes foreign corporations) are required to pay Minimum Alternate Tax (MAT) @ of 18.5 % on book profits if the tax calculated as per above rates are below 18.5% of book profits.

Companies must pay tax on the Dividend Distribution Tax (DDT) towards the shareholders in a particular year. This dividend is exempt in the hands of shareholders up to a sum of Rs. 10 lakh but the corporations have to pay tax at the rate of 20.56 %.

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eStartIndia Team

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