Corporate tax rate in India is the percentage of tax that companies need to pay on their profits. In 2025, the Government of India continues to offer different tax rates for domestic and foreign companies. Knowing the latest corporate tax rates helps businesses plan their finances better and stay compliant. This blog will explain the current tax rates, new updates, and other key details for companies in India.
Corporate tax is the tax that companies pay to the government on the profits they earn. It applies to both domestic and foreign companies doing business in India. The tax is calculated after deducting all business expenses from the total income. Corporate tax is an important source of revenue for the government and is governed by the Income Tax Act, 1961. It ensures that companies contribute their fair share towards the country’s economic development.
Corporate tax is one of the most important taxes that companies in India must pay on their profits. The corporate tax rates are different for domestic companies and foreign companies, and they also vary depending on the chosen tax regime and annual turnover. Let’s understand the tax rates for both categories in simple terms.
Domestic companies are those that are registered in India and managed from within the country. In 2025, the tax rates for such companies depend on two things; their turnover and whether they choose the old regime (with exemptions and deductions) or the new optional regime (with lower rates but no exemptions).
Foreign companies are those incorporated outside India but earn income from Indian operations. This could be through a branch, partnership, or any other business agreement or arrangement in India. The tax treatment for foreign companies differs based on the type of income they earn from Indian sources.
Surcharge:
Domestic companies must pay a surcharge on the income tax amount once their net income crosses certain thresholds. If their income exceeds ₹1 crore but remains below ₹10 crore, they pay a 7% surcharge. If their income goes beyond ₹10 crore, the surcharge increases to 12%. Foreign companies face slightly lower surcharge rates: they pay 2% when their income falls between ₹1 crore and ₹10 crore, and 5% if it exceeds ₹10 crore.
Health & Education Cess:
The government levies the Health and Education Cess as a compulsory tax on the total income tax and any applicable surcharge. It collects this cess to fund health and education initiatives across the country. The current rate is 4%, and authorities apply it only after calculating the income tax and surcharge amounts.
Tax Regime | Applicable To | Base Rate | Effective Rate (with surcharge & cess) | Deductions Allowed | MAT Applicable |
---|---|---|---|---|---|
Old Regime | All Domestic Companies | 25% or 30% | Varies with income (up to 34.94%) | Yes | Yes |
New Regime (115BAA) | Any Domestic Company | 22% | 25.17% | No | No |
New Regime (115BAB) | New Manufacturing Companies | 15% | 17.16% | No | No |
In 2025, India’s corporate tax structure continues to offer flexibility and competitive rates for both domestic and foreign companies. With the option to choose between old and new tax regimes, businesses can plan taxes as per their needs. The latest Budget updates also aim to simplify tax procedures and boost investment. Staying informed about these changes is essential for smooth financial planning and compliance.
Corporate Tax Rate for companies
Form 10IC and Form 10ID of IT Act
Tax Rate on Domestic Company in India
Startup Filing and Tax Exemption in India
Donation Tax Deductions Under Section 80G
Domestic companies can pay 25% or 30% under the old regime, or opt for 22% or 15% under the new tax regime depending on their eligibility.
No, the new tax regime is optional. Companies can choose between the old regime (with deductions) or the new one (with lower rates but no deductions).
The general tax rate for foreign companies is now 35%, and 50% on royalty or technical service fees received from Indian entities.
No, companies that opt for Section 115BAA or 115BAB under the new regime are exempt from paying Minimum Alternate Tax (MAT).
A 4% Health and Education Cess is charged on the total of income tax and surcharge, applicable to both domestic and foreign companies.
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