Corporate Tax Rate Archives

Tax Rate on Domestic Company in India Introduction Businesses operating in India must understand the domestic company tax rate. Whether you run a startup, small business, or established corporation, knowing the tax structure helps you plan finances better and comply with the law. India sets specific tax rates for domestic companies, which vary based on company size and chosen tax regime. This blog explains the tax rates for domestic companies, available incentives, and ways to optimize tax liabilities to maximize savings. Let’s explore how tax planning can benefit your business in India. What is a Domestic Company? A domestic company in India refers to a company that incorporates and registers under the Companies Act, 2013, and qualifies as an Indian company for tax purposes. It may operate as a private limited company, public limited company, or a limited liability partnership (LLP) that chooses corporate taxation. Such companies manage and control their operations within India, making them subject to Indian tax laws. The authorities tax these companies on both their domestic and global income, based on the applicable tax provisions. What is the Tax Rate for Domestic Companies? The tax rate for domestic companies is the percentage of their total income that they have to pay to the Indian government as tax. If a company earns money, a part of it goes as tax based on certain rules. Normally, companies with a turnover up to ₹400 crore pay 25% tax, and bigger companies pay 30%. Some companies can choose a special lower tax option and pay 22%, and new manufacturing companies can pay just 15%. On top of these rates, a little extra called surcharge and cess is also added. Tax rates for Domestic Company in India When running a business in India, it is important to know how much tax your company has to pay. The tax rate for domestic companies depends on their turnover, the type of company, and whether they choose the normal or special tax system. Let’s understand this in detail. 1. Normal Tax Rates for Domestic Companies Under the regular system, domestic companies are taxed based on their annual turnover: If the company’s turnover or gross receipts were up to ₹400 crore in the financial year 2022-23, the tax rate is 25%. If the turnover is more than ₹400 crore, the tax rate is 30%. This is the basic rule for calculating tax for most companies unless they opt for a special lower rate. 2. Special Concessional Tax Rates The government introduced special tax schemes to encourage businesses to grow and simplify tax payments. Companies that choose these schemes have to follow some conditions, like giving up certain deductions and benefits. Here are the two main options: Section 115BAA: Any domestic company can choose to pay tax at a lower rate of 22%. But if the company chooses this, it cannot claim many common deductions and exemptions like additional depreciation, incentives under SEZ, etc. Section 115BAB: Manufacturing companies incorporated after 1st October 2019 that begin manufacturing activities before 31st March 2024 can opt for a 15% tax rate. The government introduced this incentive to boost India's manufacturing sector. Choosing these lower rates can save tax, but companies must carefully check the conditions before opting. 3. Surcharge and Cess Apart from the basic tax rate, companies also have to pay: Surcharge: An additional tax on the income tax amount, depending on the total income. If total income is between ₹1 crore and ₹10 crore, surcharge is 7%. If total income is more than ₹10 crore, surcharge is 12%. Health and Education Cess: After adding the surcharge, the government charges a 4% cess on the total tax and surcharge amount. The government uses this cess to fund health and education programs. We provide expert services for ROC filing for Pvt Ltd company, LLP annual filing, and OPC annual compliance, ensuring timely and accurate regulatory compliance for your business. Tax Incentives and benefits Domestic Companies in India? The government gives many tax benefits to domestic companies to help them grow and save money. These incentives encourage businesses to invest more and create new jobs. Here are some important tax benefits that companies can enjoy: 1. Deductions for Business Expenses Domestic companies can claim deductions for many expenses they spend while running the business. Expenses like research, employee welfare, and promoting exports can reduce the total income on which tax is paid. This helps companies lower their overall tax amount. 2. Benefits for Companies in SEZs Companies that start their units in Special Economic Zones (SEZs) get tax benefits. They can enjoy full tax exemption on export income for the first five years. After that, they get partial benefits for a few more years, making SEZs a good choice for businesses looking to expand globally. 3. Depreciation on Assets Companies can claim depreciation on assets like buildings, machinery, and equipment used in the business. Depreciation means the value of assets goes down over time. Claiming it helps companies reduce their profits on paper and, therefore, pay less tax. 4. Tax Holiday for Start-ups Start-ups that are recognized by the government can get a tax holiday under Section 80-IAC. They can claim full tax exemption for three out of the first ten years after starting their business. This is a big help for new companies who are trying to survive and grow in the early years. 5. Special Low Tax for New Manufacturing Companies New manufacturing companies can pay a very low tax rate of just 15% under Section 115BAB. To get this benefit, they must be set up after October 1, 2019, and start work before March 31, 2024. This move aims to boost manufacturing and create more jobs in India. 6. Lower Minimum Alternate Tax (MAT) Companies that do not choose the special tax regime have to pay MAT at a lower rate of 15%. Earlier, the MAT rate was higher. By reducing MAT, the government made it easier for companies to have more money for business growth. Conclusion Understanding the domestic company tax rate in India is very important for every business. The tax rate you choose can affect your profits and growth. Companies can either follow the normal tax rates or go for special lower tax rates, depending on their situation. There are also many tax benefits that can help in saving money. Good tax planning and using the right incentives can help companies lower their tax burden and increase their savings. In short, staying informed and planning smartly can make a big difference in a company's financial success. Suggested Read : Tax Benefits of LLP LLP Turnover Limits OPC Compliance After Incorporation Tax Chart For Domestic Pvt ltd Company Taxes & Compliances for Pvt Ltd Company FAQ A domestic company is a company that is registered in India and is managed and controlled from India. It can be a private limited, public limited, or LLP taxed as a company.If the turnover is up to ₹400 crore, the tax rate is 25%. If the turnover is more than ₹400 crore, the tax rate is 30%.Yes, domestic companies can opt for lower tax rates like 22% under Section 115BAA or 15% under Section 115BAB if they meet certain conditions.Surcharge is an extra tax on the income tax amount if income crosses certain limits, and cess is a 4% charge used for health and education.Companies can lower their taxes by using deductions, investing in SEZs, claiming depreciation, choosing the right tax regime, and following proper tax planning.

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Tax Rate on Domestic Company in India

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