Corporate Tax in India: Overview, Meaning, Types & Rates

In a direct taxation system, the income made by an individual or a business entity is taxed as per the prescribed rate. Depending on the categories of taxpayers, this direct tax can be sub-divided into personal and corporate tax.

This article summarises the essential aspects of corporate tax in India. Hence, interested readers must keep reading to know more about it.

What Is a Corporate Tax in India?

A corporate tax is a direct tax chargeable on the income earned by foreign and domestic companies in India.

What Are Different Types of Corporates in India?

After knowing what a corporate tax is, let’s learn what a corporate denotes.

A corporate implies a juristic person who is a legal body independent from its shareholders. An income generated by a corporate is assessed and evaluated separately from the dividends it provides to its stakeholders. It is not considered in calculating the tax for a corporate but is assessed as a shareholder's income.

A corporate is further divided into 2 categories which are summarised in the following table:

Corporate Type	Meaning
Foreign Corporate	A foreign corporation denotes a company that is not Indian in its origin and registered under the Companies Act of India, where some proportion of management and control rests outside India.
Domestic Corporate	A corporate recognised under the Companies Act of India is referred to as a domestic company. It also covers foreign companies where the management and control are entirely based in India.

What Are the Corporate Tax Rates in India?

Take a look at the following table that highlights the corporate tax rate in India:

Corporate Tax Rate for Domestic Company for AY 2022-23 & 2021-22

Income Range	Tax Rates for AY 2022-23	Tax Rates for AY 2021-22
Total turnover in the preceding fiscal year 2018-2019 is not above ₹ 400 crores	NA	25%
Total turnover in the financial year of 2019-2020 is not above ₹ 400 crores	25%	NA
Other domestic companies	30%	30%
If opted under Section 115BA	25%	25%
If opted under Section 115BA	22%	22%
If opted under Section 115BA	15%	15%

Corporate Tax Rate for Domestic Company for AY 2020-21

Income Range	Tax Rates for AY 2020-21
Total turnover of up to ₹ 400 crores in the fiscal year 2017-2018	25%
Total turnover of ₹ 400 crores for the fiscal year 2018-2019	NA
If opted under Section 115BA	25%
If opted under Section 115BAA	22%
If opted under Section 115BAB	15%

Corporate Tax Rate for Foreign Companies for AY 2022-23 & 2021-22

Income Range	Tax Rates
Royalty earned from an Indian resident or Government after 31st March 1961 but before 1st April 1976/ Fees received from rendering technical services after 29th February 1964 but before 1st April 1976, given the approval from the Central Government	50%
Other income	40%

What Is the Surcharge Rate and Additional Cess on Corporate Tax?

Following are the surcharge rates and additional cess for AY 2022-23, 2021-22, and 2020-21 which are to be added to the rates mentioned above:

Domestic Companies

Particulars	Surcharge Rate
Aggregate turnover is more than ₹ 1 crore but within ₹ 10 crores	7%
Aggregate income is more than ₹ 10 crores	12%
If opted under Section Section 115BAB and Section 115BAA	10%
Health and education cess	4%
MAT (Minimum Alternate Tax) on profits, applicable when the tax is calculated according to Section 115JB	15%

Foreign Companies

Particulars	Surcharge Rates
Aggregate turnover is more than ₹ 1 crore but within ₹ 10 crores	2%
Aggregate income is more than ₹ 10 crores	5%
Health and education cess	4%

What Are the Types of Income That a Company Earns?

Knowing about the components that constitute the total income of a company is essential to compute corporate tax on it. Here are the following types of income that makes up the income of a company:

Profits
Capital gains
Income arising from renting a property
Additional sources of income, such as interest and foreign dividends

Things to Consider for Calculating Net Income of a Corporate

calculation of net income — (source: economictimes)

Once an individual understands what comprises an income of a corporation, it's easier to calculate its net income. A corporation usually calculates corporate tax on net revenue. The latter is the remaining amount after deducting the required expenses from income. The components of income have been discussed above. Now, the expenditures of a corporate include-

Depreciation
The cost of selling commodities
Expenditures associated with administrative purposes etc.

Thus, after assessing both, use the following formula to calculate the net income of a corporate-

Net Income = Gross Income – (Expenditures + Depreciation)

What Are the Tax Rebates Available on Income Tax of a Corporate?

Here is the list of tax rebates available on income tax of companies -

A domestic company can eliminate the dividends received from another domestic company while calculating its income.
Deductions are available for new undertakings and export
A company can claim deduction on newly established infrastructure and power sources
Certain provisions are available for venture capital enterprises and funds.
A company can take forward a business loss for up to 8 years.
In specific cases, deductions are applicable on dividends, interest and capital gains.

Knowing about the details of corporate tax in India will assist a company in planning their finances in advance and managing their tax liabilities accordingly. However, one can take help from professionals to avoid any inconvenience later.

Frequently Asked Questions

✓ Do companies need to pay MAT other than corporate tax?

Yes. According to Section 115JB, corporate taxpayers are eligible to pay MAT in a particular year. This is valid when the income tax payable towards the overall income is calculated according to the Income Tax Act and is below 15% of its book profit, in addition to health and education cess and surcharge.

✓ Has the Government extended a concession on corporate tax?

Yes, the Government has offered a concession on corporate tax by 15%, which is available up to March 2024.