India Corporate Tax Guide
India's corporate tax system has multiple rates depending on the type and size of the company. The base rates are 25% (for companies with turnover up to INR 400 crore) and 30% (for others). Domestic companies can opt for a lower rate of 22% under section 115BAA by foregoing exemptions. A surcharge of 7-12% applies on taxable income above INR 1 crore or INR 10 crore, plus a 4% health and education cess on tax and surcharge. The Minimum Alternate Tax (MAT) is 15% of book profits.
Corporate Tax Rates (FY 2025-26)
- 25% (Base Rate): Domestic companies with an aggregate turnover up to INR 400 crore in the previous year. This rate applies without the need to forego exemptions.
- 30% (Base Rate): Domestic companies with turnover exceeding INR 400 crore. Also applies to companies not eligible for the reduced rate.
- 22% (Section 115BAA): Any domestic company can opt for this rate by giving up all exemptions and deductions (including 80C, accelerated depreciation, etc.). No MAT applies under this option.
- 15% (Section 115BAB): New domestic manufacturing companies set up on or after 1 October 2019, commencing production before 31 March 2024 (extended). The company must not claim any exemptions.
Surcharge
- Nil: Taxable income up to INR 1 crore.
- 7%: Taxable income above INR 1 crore but up to INR 10 crore. The marginal relief applies for income slightly above INR 1 crore.
- 12%: Taxable income above INR 10 crore. Companies opting for section 115BAA or 115BAB pay a lower surcharge of 10% (irrespective of income level).
The surcharge is calculated on the income tax amount (before cess). For example, a company with INR 15 crore taxable income at 25% pays a base tax of INR 3.75 crore, surcharge at 12% of INR 45 lakh, totalling INR 4.20 crore before cess.
Health and Education Cess
A 4% health and education cess is levied on the total tax amount (including surcharge). This is not deductible and applies to all companies regardless of the tax regime chosen. Continuing the example above: tax INR 3.75Cr + surcharge INR 45L = INR 4.20Cr, cess at 4% = INR 16.8L, total INR 4.368Cr.
Minimum Alternate Tax (MAT)
MAT is 15% (effective rate 15% + surcharge + 4% cess) of book profits as per the Companies Act accounts. MAT applies when the regular income tax is less than 15% of book profits. MAT credit can be carried forward for up to 15 years and set off against future tax liability. Companies opting for section 115BAA or 115BAB are exempt from MAT.
FAQs
Should my company opt for section 115BAA (22% rate)?
Section 115BAA is beneficial if your company has few exemptions and deductions. Compare the effective tax rate under the regular regime (25% or 30% + surcharge + cess) with 22% + 10% surcharge + 4% cess (effective ~25.17%). If your effective rate under the regular regime exceeds 25.17%, opt for 115BAA.
What is the due date for corporate tax returns?
The due date for filing corporate tax returns is 31 October of the assessment year (for companies not requiring audit) or 30 November (for companies requiring audit). Transfer pricing cases have a due date of 30 November.
Are dividends taxable in the hands of the company?
No. The Dividend Distribution Tax (DDT) was abolished from 1 April 2020. Dividends are now taxable in the hands of the recipient (at applicable rates) and the company deducts TDS at 10% on dividends paid to residents (20% if PAN is not provided).