CORPORATE TAXES IN INDIA

Category: Academics

Corporate Taxes in India India is fast becoming a country of booming business. In the past few years, several innovative ideas have come to fruition, with more and more outsiders looking to get into the Indian markets. But whenever a new business idea comes to life, an inevitability follows: corporate taxes. For India to become a lucrative country for conducting business, outsourcing work, or forming partnerships, corporate taxation needed to undergo certain changes. No foreign company would be willing to put in time and efforts expanding their business to India, if a sizeable chunk of their ROI would be eaten up by corporate taxes. To that end, there were changes made in the tax rates, which today are very competitive as compared to other advanced nations. General corporate tax rates are as follows: Type of company Tax rate for AY22-23 (in %) Domestic company with Turnover below 400 crores in AY20-21 25 Any other company 30 Foreign company 40 Surcharge Rates applicable: Type of company If net income below Rs 1cr If net income between Rs 1 cr-10cr If net income exceeds Rs 10cr Domestic company Nil 7% 12% Foreign company Nil 2% 5% As is evident from the above data, foreign companies looking to expand business in India have been given due reductions, which are highly favorable for anybody wanting to start offices in India. 1.1. Some Points to Note 1.There will be a 4% Education cess payable on income tax and surcharge both. 2. Wholly Owned Subsidiaries (WOS) of foreign companies will be taxed as Domestic Companies and will not be levied the above slashed rates. 3. All companies will be subjected to Minimum Alternate Tax if they have losses as per income tax regulation but have book profits in their financials. 4. Companies can opt for concessional tax rates under section 115 BAA or 115BAB for specific companies. What is Section 115BAA? Section 115BAA was a government initiative, undertaken through the Taxation (Amendment) Ordinance 2019 in September 2019. The objective of this initiative was to allow for reduced corporate tax rates. However, the tax rate concession can only be enjoyed by a domestic company that can tick mark certain conditions put in place by the income tax department. Individuals, LLPs, partnership firms, and a majority of the foreign companies won’t be eligible for Section 115BAA tax concessions. Once opted, companies cannot revert back to their previous taxation. For those who are eligible, following rates apply: Description Income Tax Surcharge E cess Total Companies who opt 115BAA 22 10 4 25.168 2.1. Section 115BAB Just like Section 115BAA, another scheme was introduced, specifically for manufacturing companies. This one too has a set of conditions that a company needs to fulfil in order to be eligible. Concession rates under Section 115BAB: Description Income Tax Surcharge E cess Total Companies who opt 115BAA 15 10 4 17.16