The corporate tax also known as corporation tax is a direct tax imposed on the total income or profit that corporate firms make from their businesses, normally during one financial year. All companies which are registered in India in public or private sectors under the Companies Act, 1956 are legally responsible to pay corporation tax.

The corporate tax is levied at a specific rate based on the provisions of the Income-tax Act, 1961. The revenue generated from the corporate tax is an important source of income for the Indian government. The domestic companies were taxed at a 30 percent rate for the financial year 2014-2015.

Corporate Taxes India

Corporate organizations that are legally responsible to pay corporation tax in India are as follows:

  • Incorporated corporations
  • Corporations that need revenues from India and do the business on these earnings.
  • Other International firms that have permanently established in India
  • Corporations with the earned title of being an Indian resident only for the tax payment purpose.

Types of corporate organizations

Corporations are classified in the following two categories in India

Domestic corporation

An organization that is registered under India’s Companies Act,2013 and established in India is known as a domestic corporation.

Foreign corporations

A company that is located overseas and not in India is termed as a foreign corporation. If some part of that foreign corporation is located overseas, then also it is termed as a foreign corporation. Foreign corporations are not registered under India’s companies act, 2013.

Corporate Tax Rate in India

In India, the corporate tax rate depends on the type of company. For example, domestic corporations and foreign corporations pay taxes at different rates.

For the business year 2019-20, the information is given below.

Corporate tax rates in India

1.Domestic Companies

With Annual turnover up to Rs. 250 Crore

  • Corporate tax rate: 25%
  • Surcharge on net income up to Rs. 1 crore: Nil
  • Surcharge on net income greater than Rs. 1 crore but less than 10 crore: 7%
  • Surcharge on net income greater than Rs. 10 crore: 12%

With an annual turnover of more than Rs. 250 Crore

  • Corporate tax rate: 30%
  • Surcharge on net income up to Rs. 1 crore: Nil
  • Surcharge on net income greater than Rs. 1 crore but less than 10 crore: 7%
  • Surcharge on net income greater than Rs. 10 crore: 12%

2.Foreign Companies

  • Corporate tax rate: 40%
  • Surcharge on net income up to Rs. 1 crore: Nil
  • Surcharge on net income greater than Rs. 1 crore but less than 10 crore: 2%
  • Surcharge on net income greater than Rs. 10 crore: 5%

Basics of Corporation Tax Planning

Every taxpayer in India including corporate businesses needs some tax planning and strategy that will help them to increase their net profits by reducing the tax payment. The corporations hire professional tax lawyers that are well aware of all tax laws, rules and regulations made by the government of India to help them in maximizing their profit by reducing the amount of tax payable legally.