A corporate entity's net income or profit from its operations, whether domestic or foreign, is subject to a direct tax known as a corporation or corporate tax. Depending on the kind of corporate entity and the various revenues generated by each corporate entity, the corporate tax rate is based on a slab rate structure. A tax on a company's net income is known as corporation tax.

Companies registered in India under the Companies Act 1956, whether private or public, are required to pay corporate tax. Domestic companies are subjected to tax (rates mentioned below), and if net income is between Rs. 1 crore and Rs. 10 crores, a surcharge of 7% is applied. Surcharges at a 12% rate are applied if net income exceeds Rs. 10 crores. In addition, regardless of the level of net income, a 4% health & education cess is added to the total income tax and surcharge.

The company must pay a tax rate of 50% if the income is reported as any royalties or fees for technical services obtained by a foreign company from an Indian concern or the Indian government under any agreement established before April 1, 1976, central government approves. If the business has additional sources of income, an additional 40% tax will be levied against it. Additionally, if the income is between Rs 1 crore and Rs 10 crore, an additional 2% surcharge is applied. If it is moreover Rs 10 crore, a 5% surcharge would be added.

Regardless of the level of net income, a 4% health & education cess is added to the total income tax and surcharge. When net income exceeds Rs 1 crore and Rs 10 crore, local and foreign enterprises are granted a margin of relief.

Tax Rates for AY 2023-24

●       In case of domestic companies

Where its total turnover/gross receipt during the PY 2020-21 does not exceed Rs. 400 crores	25%
Opted for Section 115BA​	25%
Opted for Section 115BA​A	22%
Opted for Section 115BA​B	15%
Any other domestic co.	30%

 

●       In case of foreign companies

Royalty rece​ived from Govt or an Indian concern in pursuance of an agreement made with the Indian concern after 31.03.1961, but before 01.04.1976, or fees for rendering technical services in pursuance of an agreement made after 29.02.1964 but before 01.04.1976 and where such agreement has, in either case, been approved by the CG	50%
Other income	40%

 

Surcharge

Total income	Domestic company	Foreign company
Less than 1 crore	NIL	NIL
Between 1 crore and 10 crores	7%	2%
Exceeding 10 crores	12%	5%

For new companies

The government has added another new provision to the Income-tax Act from FY 2019–20. This provision gives any new domestic company formed on or after October 1, 2019, making fresh investments in manufacturing the option to pay income tax at 15%. The government is doing this to attract new investment in manufacturing and support its flagship "Make-in-India" initiative. This benefit is accessible to businesses that start producing on or before March 31, 2023, but do not take advantage of any exemptions or incentives. These companies' effective tax rate will be 17.01%, including surcharge and cess, and they won't have to pay minimum alternate tax.

 

 

For existing companies

Corporations with yearly revenues up to Rs 400 crore who do not request any incentives or exemptions must pay 22% tax in addition to any relevant cess and surcharge under the new tax slab proposed by the Finance Ministry. The current effective corporate tax rate is 25.17%. However, since the new regulations were enacted, businesses are exempt from paying MAT, or minimum alternate tax.

To sum up -

India has a sophisticated tax system with distinct lines of jurisdiction between the Central, State, and municipal governments.

Customs charges, central excise, service tax, and income taxes are all levied by the central government, with the exception of the tax on agricultural income, which the state governments levy.

The State Governments impose Value Added Tax (VAT), stamp duty, state excise, land revenue, and professional tax.

A tax on real estate, octroi, and amenities like water supply, drainage, etc., may be assessed by local authorities.

Regardless of income, all businesses, whether domestic or international, are subject to taxation. However, corporations are usually categorized as follows for taxes purposes:

1. A domestic corporation in which the general public has a significant financial interest or a Public Company.
2. A domestic company with a small amount of public ownership. A Private Company is interested in this.
3. A foreign company that hasn't taken the necessary steps to declare and pay dividends within India.

Companies' taxable income is determined in the same way as it is for other non-corporate assessees. Each head of revenue is calculated separately, and the total income is added. However, for obvious reasons, a business cannot earn any income under the category of "salary."

Indian businesses must pay taxes in India on all of their worldwide income, regardless of where it came from or where it went. However, only income from activities conducted in India, or some circumstances, income deemed to have occurred in India, is subject to taxation for foreign corporations. He continues by listing royalties, fees for technical services, interest, earnings from the sale of capital assets located in India (including gains from the sale of a stake in an Indian company), and dividends from Indian corporations. As a result, a company's residency status affects the tax responsibility on its income.

Tax obligations under the Income Tax Act are covered through double taxation avoidance agreements between India and a foreign country. Therefore, the income tax provisions shall not supersede the treaty terms.

Over the past ten years, India's taxation structure has undergone significant changes. Tax regulations have been streamlined, and the tax rates rationalized, which has improved compliance, made paying taxes easier, and improved enforcement. However, in India, the task of streamlining tax administration is still in progress.