Corporate Income Tax

Corporate taxation in India isn't a single, flat charge. It covers several layers that apply depending on how a company earns and distributes its income. The core one is corporate income tax, charged on a company's net profits for the year. Alongside that sits Minimum Alternate Tax (MAT), which kicks in when a company's tax liability under normal provisions works out lower than 15% of its book profits, ensuring profitable companies don't escape tax through exemptions alone. There's also withholding tax, or TDS, deducted at source on specified payments such as salaries, contractor fees and interest. Companies engaged in cross-border transactions with related parties fall under transfer pricing regulations, which govern how related party international transactions are priced for tax purposes. And where dividends are concerned, the tax liability now sits with shareholders rather than the company itself, since Dividend Distribution Tax was scrapped a few years back.

Corporate tax applies to any company incorporated in India, regardless of whether its operations are large or small, as well as to foreign companies earning income that arises within India. This includes private limited companies, public limited companies and one person companies, all of which are treated as separate legal entities distinct from their shareholders or directors. It's worth noting that LLPs and partnership firms don't fall under corporate tax in the same sense; they're taxed under separate provisions specific to their structure. Whether a company falls into the 25%, 22% or 30% bracket, or qualifies for a concessional regime, comes down to factors like turnover, the nature of its business and which section it chooses to be taxed under.

A private limited company with turnover up to INR 400 crore in the relevant previous year is taxed at 25% under the default regime. If turnover exceeds that figure, the rate moves up to 30%. That said, most private limited companies today weigh up whether the Section 115BAA (Section 200 of Income tax act 2025) route makes more sense, since it offers a flat 22% rate with a fixed 10% surcharge, irrespective of income level, though it does mean forgoing deductions such as those under Chapter VI-A. Once surcharge and the 4% cess are factored in, the effective rate for a company on the 115BAA regime comes to roughly 25.17%, while those on the standard 25% or 30% rates end up paying somewhere between 26% and close to 35%, depending on their income slab. The right choice between regimes really depends on what deductions and incentives a company would otherwise be able to claim.

A corporate income tax assessment typically draws on a fairly standard set of financial and statutory records. Companies are expected to have their audited financial statements ready, including the profit and loss account and balance sheet, along with the tax audit report where applicable under Section 44AB (Section 63 under the new Income Tax Act, 2025). The corporate income tax return itself, filed in Form ITR-6, forms the basis of the assessment, supported by details of advance tax payments and TDS certificates. Where a company has undertaken related-party transactions, transfer pricing documentation and Form 3CEB (form 48 as per Income-tax Rules, 2026), come into play as well. Bank statements, records of major expenses, income earned and deductions claimed, details of fixed assets and depreciation, and board resolutions relevant to significant transactions during the year may also be called for, depending on the nature of the assessment and the specific queries raised by the tax authorities.

Rates depend heavily on which regime a company falls under. Under the standard regime, domestic companies with turnover up to ₹400 crore in the relevant prior year are taxed at 25%, while those above that threshold pay 30%. Many companies instead opt for the concessional regime under Section 200 of Income tax act 2025, which offers a flat 22% rate but requires giving up most exemptions and deductions in return. New manufacturing companies incorporated after October 2019 and had commenced their operations before March 31st, 2024 can go a step further and claim 15% under Section 201 of Income tax act 2025, provided they meet the conditions attached to that section. On top of whichever base rate applies, there's a surcharge that varies with income level, however in case of concessional regime, there is fixed surcharge of 10% irrespective of income range, plus a 4% health and education cess, so the effective tax burden usually lands somewhere between 25% and just under 35%. Foreign companies operating in India, by comparison, are taxed at a higher base rate of 35%.