What Is Corporate Tax?
The Income Tax Act of 1961 imposes corporate taxes on both domestic and foreign entities. Within the framework of this legislation, the Government of India requires domestic corporations to fulfill their corporate tax obligations in accordance with their global income. In contrast, foreign corporations are solely subject to taxation for income generated or received within the territorial boundaries of India. This statutory distinction underlines the taxation principles applicable to domestic and foreign companies, underscoring the universal income consideration for the former and the territorial income focus for the latter. Tracing tax liability based on these criteria aligns with the inclusive goal of ensuring equitable and transparent taxation practices within the Indian corporate landscape.
Different Types of Corporate Tax in India
There are different types of corporate taxes in India, depending on the nature and income of the company.
Corporate Tax for Domestic Companies:
-
Imposed on entities registered under Indian company law.
-
Tax rates range from 15% to 30%, contingent on turnover and company-elected options.
-
Surcharge of 7% or 12% is levied on companies exceeding an income threshold of 1 crore rupees.
Corporate Tax for Foreign Companies:
-
Applicable to companies unregistered in India but deriving income from the country.
-
Tax rate is 40% for business income and 50% for royalties or fees.
-
Surcharge of 2% or 5% applies to companies surpassing a 1 crore rupees income threshold.
Additional Taxes:
-
Complementary to corporate tax, companies are obligated to pay supplementary levies:
-
Health and education cess of 4% on the total tax amount.
-
Minimum alternate tax at 15% on book profits for companies paying less than 18.5% of income as tax.
-
Dividend distribution tax at 15% on dividends disbursed to shareholders.