Corporate Tax Rate in India has changed in past few years
The government have taken efforts to reduce the income tax rate from 30% to 25% for few domestic companies and also given option of reducing to a further 22% and also 15% in case of new manufacturing companies.
Corporate Tax Rate (Without Availing Reduced Corporate Tax Option)
Income | Less than 400 Crore T/o in FY20-21 Basic % | Less than 400 Crore T/o in FY20-21 Effective % | Domestic Co. Basic % | Domestic Co. Effective % | Foreign Co. Basic % | Foreign Co. Effective % |
Less than 1 Cr | 25 | 26 | 30 | 31.2 | 40 | 41.60 |
1 to 10 Cr | 25 | 27.82 | 30 | 33.38 | 40 | 41.60 |
More than 10 Cr | 25 | 29.12 | 30 | 34.94 | 40 | 43.60 |
* Surcharge of 10% is payable only where total taxable income exceeds INR 1 Crore.
** Effective tax rates include surcharge and health and education cess of 4%.
Reduced rate of tax for certain existing domestic companies (Section 115BAA)
A beneficial rate of 22% (plus surcharge of 10% and applicable health and education cess of 4%) can be availed by the company and is applicable on satisfaction of the following conditions, cumulatively:
The company has not claimed a tax holiday available to a unit in a Special Economic Zone (SEZ), benefit of accelerated depreciation, or benefit of additional depreciation, investment allowances, expenditure on scientific research, and any deduction in respect of certain income other than deduction in respect of employment of new employees and deduction of certain income of Offshore Banking Units and International Financial Service Centre.
The company has not claimed set-off of loss and unabsorbed depreciation carried forward from any earlier years including set-off of any unabsorbed depreciation and losses relating to loss/depreciation on amalgamation, provided such loss is attributable to the deductions referred to in (i) above. However, the corresponding adjustment in written down value of such block of asset as on 1 April 2019 will be allowed in the prescribed manner.
The option of seeking the benefit of a reduced CIT rate of 22% is furnished in the prescribed manner before the due date of furnishing of income.
Companies exercising this option have been excluded from the applicability of provisions of minimum alternate tax (MAT) and MAT credit.
Benefit of the above provision of reduced tax rate will not be available in the year of non-compliance and all the subsequent years and other provisions of the Income-tax Act will apply as if the option has not been exercised from the year of non-compliance.
Reduced rate of tax for newly set-up domestic manufacturing companies and companies engaged in generation of electricity
A beneficial rate of 15% (plus surcharge of 10% and applicable health and education cess of 4%) with effect from tax year 2019/20 for newly set-up domestic manufacturing companies can be availed. The benefit of concessional tax rate of 15% has been extended to domestic companies engaged in the business of generation of electricity from tax year 2020/21.
The beneficial rate of 15% (plus surcharge of 10% and applicable health and education cess) can be exercised at the option of the company and is applicable on satisfaction of the following conditions, cumulatively:
The company is incorporated on or after 1 October 2019 and commences manufacture or production of any article or thing on or before 31 March 2024.
The 'business' is not formed by splitting up or reconstruction of business already in existence (exception provided for undertaking formed as a result of re-establishment, reconstruction, or revival of business).
Does not use plant and machinery previously used for any purpose in India, and no depreciation has been claimed on the same.
Does not use any building previously used as a hotel or convention centre for which deductions under provisions of the Income-tax Act have been claimed or allowed.
The company is not engaged in any business other than the business of manufacture or production of any article or thing and research or distribution of such article or thing manufactured or produced. The following businesses will not be treated as business of manufacture or production of any article or thing:
Development of computer software in any form or in any media.
Conversion of marble blocks or similar items into slabs.
Bottling of gas into cylinder.
Printing of books or production of cinematograph films.
Any other business notified in this behalf.
The company has not claimed a benefit for establishing its unit in an SEZ, benefit of accelerated depreciation, or benefit of additional depreciation, investment allowances, expenditure on scientific research, and any deduction in respect of certain income other than deduction in respect of employment of new employees.
The company has not claimed set-off of loss and unabsorbed depreciation carried forward from any earlier years, including set-off of any unabsorbed depreciation and losses relating to loss/depreciation on amalgamation, provided such loss is attributable to the deductions referred to in (vi) above.
In case difficulty arises in non-fulfilment of certain conditions in this section, the Indian Revenue Department may issue guidelines for removing the difficulty.
The option of seeking the benefit of a reduced CIT rate of 15% is furnished in the prescribed manner before the due date of furnishing of income.
Domestic transfer pricing provision will be applicable for these companies.
Companies exercising this option have been excluded from the applicability of provisions of MAT and MAT credit.
Benefit of the above provision of reduced tax rate will not be available in the year of non-compliance and all the subsequent years and other provisions of the Income-tax Act will apply as if the option has not been exercised from the year of non-compliance. However, such company may exercise an option to be governed under provisions of reduced tax rate of 22% (plus surcharge of 10% and applicable health and education cess).
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