Indian Income Tax

Corporate Tax in India

Corporate tax rate in India is at par with the tax rates of other nations of the world. The corporate tax rate in India is based on the origin of the company.

If the company is domicile to India, then the tax rate is flat at 30%. But for a foreign company, then the tax rate depends on several other factors and considerations. For companies that are domicile to India, tax is charged on the global income whereas for the foreign companies present in India, tax is charged on their income within Indian Territory. Incomes that are taxable for foreign companies include income from the capital assets in India, interest gained, income from sale of equity shares of the company, royalties, dividends earned, etc.

Domestic Corporate Income Taxes Rates:

Incase of Domestic Corporations the effective tax rate as well the tax rate with surcharge as is 30%. It should be noted that if the taxable income is greater than Rs. 1 million then a surcharge of 10% of the tax on income is also levied.

It is important to note the fact that all the companies formed in India are considered as Indian domestic companies, even for ancillary units with mother companies in foreign countries

Foreign Companies income tax rates:

  • For dividends: - 20% for non-treaty foreign companies and 15% incase of companies under the treaty based in the United States

  • For interest gains: - 20% for non-treaty foreign companies and 15% for companies under the treaty based in the United States

  • For royalties: - 30% for non-treaty foreign companies and 20% for companies under the treaty based in the United States

  • For the technology based services in case of non-treaty foreign companies & 20% for companies under the treaty based in the United States

  • For all other kinds of income and gains: - 55% in case of non-treaty foreign companies and 55% for the companies under the treaty based in the United States

  • Attention should be given on levying inter corporate rates in case holding is minimum

  • Attention should be given on the fact that sanctions of the tax authorities on tax withholding

  • Attention should be given on several of the tax treaties that India signed with other countries and also on the various encouraging tax rates

Some of the tax rebates under corporate tax rate in India:

  • Gains pertaining to long term capital are subject to low tax incidence

  • Venture capital funds and venture capital companies have special tax provisions

  • Specula tax provisions are applicable for non resident Indians involved in activities in India

  • Under the Finance Bill 1996, the minimum alternative tax (MAT) is levied on the corporate sector
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