Understanding corporate tax in India is no longer optional; it directly shapes how you structure your business, plan investments, and manage profitability. Whether you are a startup founder, a domestic enterprise, or a foreign company operating in India, the tax rate applicable to you can vary significantly based on your turnover, business type, and the provisions you qualify for under the Income Tax Act.
This guide breaks down everything you need to know from base tax rates and concessional sections to surcharges, cess, compliance deadlines, and the latest updates for FY 2024-25.
How to Calculate Company Income Tax
Calculating company income tax involves determining your net profits after allowable expenses and deductions, applying the appropriate tax rate, and adding any surcharges and cess.
Company Income Tax Calculator
Calculate the estimated income tax for domestic or foreign companies under Indian tax laws.
Enter your taxable income (before deductions) and the total deduction amount, then select the applicable tax rate based on your turnover or special section eligibility. The calculator will instantly compute your estimated tax liability, including surcharges and cess. It is updated for FY 2024-25 (with returns due by October 31st, 2025, or the latest announced date) and FY 2025-26 as per Budget 2025.
What Is Corporate Tax/Company Income Tax?
Corporate Tax/Company income tax is levied on a company’s net profits after deducting allowable expenses and exemptions. In India, the tax framework distinguishes between:
- Domestic companies: Registered and operating primarily within India.
- Foreign companies: Based outside India but conducting business in India.
Each category is subject to different tax rates and regulatory requirements.
Domestic vs. Foreign Companies: Key Differences
Domestic Companies
Domestic companies are those registered and operating primarily within India. Their tax liability depends on factors like annual turnover, business nature, and eligibility under specific sections of the Income Tax Act.
Income tax rates for domestic companies
The income tax rate for domestic companies in India is 30%.
Income tax rate based on turnover
- 25% tax rate: For companies with a turnover (or gross receipts) of up to ₹400 crore in the previous financial year.
- 30% tax rate: Applies to all other domestic companies not covered under concessional sections.
Income tax rates under specific sections
Certain domestic businesses can benefit from reduced tax rates if they opt to forgo various deductions and exemptions. These provisions are designed to encourage efficiency and boost manufacturing investments:
- Section 115BA – 25%
Applicable to certain manufacturing companies incorporated after March 1, 2016, that do not claim deductions under Chapter VI-A, investment-linked deductions, or incentives for SEZs.
- Section 115BAA – 22%
Available to all domestic companies, regardless of their industry or incorporation date, provided they give up certain deductions and exemptions like depreciation benefits, MAT credit, and incentives.
- Section 115BAB – 15%
Available for new manufacturing companies established on or after October 1, 2019, that commence operations before March 31, 2024, and do not claim tax exemptions.
Tax Benefits on Investments/payments/incomes for domestic companies
Domestic companies can leverage several sections of the Income Tax Act to reduce their taxable income (subject to conditions):
- Section 80G: Deduction for donations made to prescribed funds and charitable institutions.
- Section 80GGA: Deduction for donations made for scientific research or rural development.
- Section 80GGB: Deduction for contributions to political parties or electoral trusts.
- Section 80IA: Deduction for undertakings engaged in developing, maintaining, and operating infrastructure facilities.
- Section 80IAB: Deduction for undertakings engaged in the development of Special Economic Zones (SEZs).
- Section 80IAC: Deduction for eligible start-ups deriving profits from specified businesses.
- Section 80IB: Deduction for profits from specified industrial undertakings (other than infrastructure projects).
- Section 80IBA: Deduction for profits derived from developing and building housing projects.
- Section 80IC: Deduction for certain undertakings in Himachal Pradesh, Sikkim, Uttaranchal, and the North-Eastern states.
- Section 80IE: Deduction for certain undertakings set up in North-Eastern states.
- Section 80JJA: Deduction for profits from the business of collecting and processing biodegradable waste.
- Section 80JJAA: Deduction for employment of new workers, applicable to assessees required to get their accounts audited.
- Section 80LA: Deduction for income of Offshore Banking Units and International Financial Services Centres (subject to conditions).
- Section 80M: Deduction for inter-corporate dividends if distributed to shareholders.
- Section 80PA: Deduction for producer companies engaged in the marketing, purchase, or processing of agricultural produce from their members.
Foreign Companies
Foreign companies are entities registered outside of India but that conduct significant business operations within the country. These can include multinational corporations, foreign subsidiaries, or branch offices, each adapting their global strategies to the local market
Income tax rates for foreign companies
Foreign companies operating in India generally have a higher tax rate than domestic businesses:
- 40% standard tax: This is the base tax rate applicable to foreign companies.
- 50% tax rate: Applies to foreign companies earning royalties or fees for technical services under certain agreements with the Indian government.
Tax benefits on investments/payments/incomes for foreign companies
While the scope of deductions for foreign companies is generally more limited than that for domestic companies, foreign entities operating in India can still leverage several specific sections of the Income Tax Act to reduce their taxable income, subject to conditions.
- Section 80G: Deduction for donations to prescribed funds and charitable institutions.
- Section 80GGA: Deduction for donations made for scientific research or rural development.
- Section 80GGC: Deduction for contributions to political parties or electoral trusts.
- Section 80IAB: Deduction for undertakings engaged in the development of Special Economic Zones.
- Section 80IE: Deduction for undertakings established in North-Eastern states.
- Section 80JJAA: Deduction for the employment of new workers, applicable to assessees with mandatory audit requirements.
- Section 80LA: Deduction for income of Offshore Banking Units and International Financial Services Centres.
Additionally, Double Taxation Avoidance Agreements (DTAA) can help reduce the effective tax rate for foreign companies by preventing the same income from being taxed in both India and the home country.
Additional Charges: Surcharges and Cess
Beyond the basic company income tax, businesses are also liable for additional charges.
Surcharge on Income Tax
A surcharge is an extra levy applied on the computed income tax, varying with taxable income levels:
For Domestic Companies
- 7% Surcharge: For taxable income exceeding ₹1 crore but up to ₹10 crore.
- 12% Surcharge: For taxable income exceeding ₹10 crore.
- 10% Surcharge: For companies opting for lower tax rates under Sections 115BAA and 115BAB.
For Foreign Companies
- 2% Surcharge: For taxable income between ₹1 crore and ₹10 crore.
- 5% Surcharge: For taxable income exceeding ₹10 crore.
Health & Education Cess
A 4% Health & Education Cess is applied to the total tax payable, including the surcharge. This cess contributes to social welfare programs in education and healthcare.
Corporate Tax For Domestic Companies
| Category / Section | Tax Rate (%) | Surcharge |
| Turnover-Based Rates | ||
| Turnover up to ₹400 crore | 25% | 7% (if taxable income between ₹1 Cr and ₹10 Cr)
12% (if >₹10 Cr) |
| Turnover above ₹400 crore | 30% | 7% (if taxable income between ₹1 Cr and ₹10 Cr)
12% (if >₹10 Cr) |
| Specific Provisions | ||
| Section 115BA | 25% | 7% (if taxable income between ₹1 Cr and ₹10 Cr)
12% (if >₹10 Cr) |
| Section 115BAA | 22% | 10% surcharge applicable |
| Section 115BAB | 15% | 10% surcharge applicable |
Corporate Tax For Foreign Companies
| Category / Type | Tax Rate (%) | Surcharge |
| Standard Tax | 40% | 2% (if taxable income between ₹1 Cr and ₹10 Cr)
5% (if >₹10 Cr) |
| Technical Services / Royalty Income | 50% | 2% (if taxable income between ₹1 Cr and ₹10 Cr)
5% (if >₹10 Cr) |
Note: A 4% Health & Education Cessis applied to the total tax payable (including surcharges) for all companies.
Corporate Tax Compliance and Filing Deadlines
All domestic companies must file their income tax return using Form ITR-6 by October 31st of the relevant assessment year. Companies are also required to pay advance tax in four instalments throughout the financial year. Additionally, companies with a turnover exceeding ₹1 crore are required to have their accounts audited by a qualified practicing chartered accountant, and those with international transactions must comply with Transfer Pricing regulations.
Key Update: Buyback Tax Change (FY 2024-25)
Effective October 1, 2024, the buyback tax under Section 115QA has been abolished. Under the Finance Act 2024, companies buying back shares are no longer required to pay tax on the buyback amount at the company level. Instead, the proceeds received by shareholders from a buyback will now be treated as a deemed dividend and taxed in the hands of the recipient at their applicable income tax rate. This is a significant shift from the earlier framework where companies bore a 20% buyback tax, and businesses planning share buybacks in FY 2024-25 onwards should factor this change into their tax planning.
Final Thoughts
Corporate income tax in India is not one-size-fits-all. Different tax rates apply depending on a company’s turnover, business type, and eligibility for specific sections of the Income Tax Act. Companies must carefully assess their financial structure, long-term growth plans, and eligibility before opting for concessional tax rates. By staying informed and consulting experts, businesses can optimize tax planning and boost profitability.
Disclaimer: This blog is intended for informational purposes only and should not be considered as professional tax advice. Always consult with a tax professional for advice tailored to your specific circumstances.
Frequently Asked Questions
1. What is the corporate tax rate in India?
The corporate tax rate for domestic companies is 25% for turnover up to ₹400 crore and 30% beyond that. Eligible companies can opt for a concessional 22% under Section 115BAA or 15% under Section 115BAB for new manufacturers. A 4% Health & Education Cess applies to all companies on the total tax payable.
2. What is the tax rate for a Private Limited company in India?
A Private Limited company pays 25% tax if turnover is up to ₹400 crore, and 30% beyond that. A lower 22% rate is available under Section 115BAA, subject to conditions. Surcharge of 7% or 12% applies based on income levels, plus a 4% Health & Education Cess. See the full rate breakdown on the Income Tax Department’s official page.
3. Who pays more tax: a Private Limited company or an LLP?
LLPs pay a flat 30% tax, while Private Limited companies pay 25% or 30% based on turnover or as low as 25.17% under Section 115BAA. However, dividends from a Private Limited company are taxed again in shareholders’ hands, whereas LLP profit distributions are not. LLPs suit profit-sharing businesses; Private Limited companies are better for reinvestment and scale.
4. What is Minimum Alternate Tax (MAT) and does it apply to all companies?
MAT is levied at 15% of book profits when a company’s normal tax liability falls below this threshold, ensuring a minimum contribution. Companies under Sections 115BAA and 115BAB are exempt from MAT but must forgo certain deductions in return.
5. Can a foreign company reduce its tax liability in India?
Foreign companies pay a standard 40% tax in India, but this can be reduced through eligible deductions under sections like 80G and 80LA, or via Double Taxation Avoidance Agreements (DTAA) that prevent income from being taxed twice. For applicable rates and DTAA details, refer to the Income Tax Department’s official rate guide.
6. Can a company switch between tax regimes?
No. Once a company opts for a concessional regime under Section 115BAA or 115BAB, the decision is irrevocable. Companies must file Form 10-IC electronically before their income tax return deadline, which commits them to forgoing specified deductions and most carried-forward losses permanently.
