Corporate Taxes In India

CORPORATE TAXES IN INDIA

  1. Corporate Taxes in India

India is fast becoming a country of booming business. In the past few years, several innovative ideas have come to fruition, with more and more outsiders looking to get into the Indian markets. But whenever a new business idea comes to life, an inevitability follows: corporate taxes.

For India to become a lucrative country for conducting business, outsourcing work, or forming partnerships, corporate taxation needed to undergo certain changes. No foreign company would be willing to put in time and efforts expanding their business to India, if a sizeable chunk of their ROI would be eaten up by corporate taxes. To that end, there were changes made in the tax rates, which today are very competitive as compared to other advanced nations.

General corporate tax rates are as follows: 

Type of companyTax rate for AY22-23 (in %)
Domestic company with Turnover below 400 crores in AY20-2125
Any other company30
Foreign company40

Surcharge Rates applicable:

Type of companyIf net income below Rs 1crIf net income between Rs 1 cr-10crIf net income exceeds Rs 10cr
Domestic companyNil7%12%
Foreign companyNil2%5%

As is evident from the above data, foreign companies looking to expand business in India have been given due reductions, which are highly favorable for anybody wanting to start offices in India. 

1.1. Some Points to Note

1.There will be a 4% Education cess payable on income tax and surcharge both.

2. Wholly Owned Subsidiaries (WOS) of foreign companies will be taxed as Domestic Companies and will not be levied the above slashed rates.

3. All companies will be subjected to Minimum Alternate Tax if they have losses as per income tax regulation but have book profits in their financials.

4. Companies can opt for concessional tax rates under section 115 BAA or 115BAB for specific companies.

  • What is Section 115BAA?

Section 115BAA was a government initiative, undertaken through the Taxation (Amendment) Ordinance 2019 in September 2019.

The objective of this initiative was to allow for reduced corporate tax rates.

However, the tax rate concession can only be enjoyed by a domestic company that can tick mark certain conditions put in place by the income tax department. Individuals, LLPs, partnership firms, and a majority of the foreign companies won’t be eligible for Section 115BAA tax concessions.

Once opted, companies cannot revert back to their previous taxation.

For those who are eligible, following rates apply:

DescriptionIncome TaxSurchargeE cessTotal
Companies who opt 115BAA2210425.168

2.1. Section 115BAB

Just like Section 115BAA, another scheme was introduced, specifically for manufacturing companies. This one too has a set of conditions that a company needs to fulfil in order to be eligible. 

Concession rates under Section 115BAB:

DescriptionIncome TaxSurchargeE cessTotal
Companies who opt 115BAA1510417.16
  • Dates for Corporate Tax Payments

Corporate taxes are paid in advance in 4 instalments. Companies are liable to pay interest if the advanced tax paid is not in accordance with advance tax provisions.

So, what are the window periods when a company is expected to pay the tax instalments? The dates are as follows:

Date% to be paid
On or before 15th of June15% of projected yearly taxable income
On or before 15th of September45% of projected yearly taxable income
On or before 15th of December75% of projected yearly taxable income
On or before 15th of March100% of projected yearly taxable income

Currently due to Covid 19, the tax filing dates are extended. So, for recent amendments to the date, always refer to latest updates from authoritative websites and government circulars.

  • Additional Considerations

Note that corporations will have to undergo an Income Tax Audit if the total turnover exceeds Rs 5 crores.

Also note that Transfer Pricing Certification is mandatory for companies that have transactions with related / commonly controlled companies as per the provision of Income Tax Act. You will have to file the TPC under Form 3CEB, by 30th November, following the end of the current financial year. Transfer pricing has huge tax saving benefits.

The timing has never been more right for entrepreneurs and risk takers to start their own businesses. Corporate tax is an inescapable part of the financial aspect of running a business. Let not taxation become a hurdle in your way to business growth. Remunance provides accounting services that help you get the necessary taxation processes streamlines. Your business can be anywhere in the world, we are still there for you. We are the partner you can rely on.