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Indian taxes are divided into two types: one is direct tax and the other is indirect tax. Speaking of direct taxes, they are levied on the income that various types of businesses generate in a fiscal year. There are different types of taxpayers who are registered with the Federal Revenue and pay taxes at different rates. For example, a natural person and a company that is a taxpayer are not taxed at the same rate.
Therefore, direct taxes are again divided into:
- income tax:The income tax paid by the individual taxpayer is the personal income tax. Individuals pay taxes on the basis ofcontrol panelsat different prices.
- corporate rate:The income tax paid by domestic and foreign companies on their income in India is the Corporate Income Tax (CIT). Corporate income tax is subject to a specific rate prescribed by the Income Tax Law, which is subject to annual changes in Union budget rates.
corporate tax in india
A corporation is an entity that has a separate and independent legal entity from its shareholders. Domestic and foreign companies are subject to corporate income tax in accordance with the Income Tax Law. While a resident company is taxed on its universal income, a foreign company is taxed only on income generated in India, ie H. accrued or received in India.
For the purposes of calculating the taxes provided for in the Income Tax Law, the types of companies can be defined as follows:
- Domestic company:A domestic company is a company registered under the Indian Companies Act, which also includes the registered foreign company wholly controlled and managed in India. A national company includes both public and private companies.
- Foreign company:A foreign company is a company that is not registered under the Indian Companies Act and has its control and management outside of India.
What is meant by business income?
Before understanding the tax rate and how corporate income tax is calculated, we need to understand the types of income a business generates. Here it is :
- business benefits
- capital gain
- Income from rental properties
- Income from other sources such as dividends, interest, etc.
Applicable tax rates
The following rates apply toNational companiesfor AY 2020-21 based on your trading volume:
|Section 115BA (Businesses with a turnover of up to Rs 400 crore in FY 2017-18)||25%||7%/12%*|
|§ 115 BAA||22%||10%|
|any other case||30%||7%/12%*|
* Plus surcharge if a business is taxable under Section 115BA. The surcharge fee is 7% if the total income is more than Rs 1 crore and up to Rs 10 crore. The surcharge is 12% if the total income exceeds Rs 10 million. However, if the company opts for the taxation of article 115 of the BAA or article 115 of the BAB, the surcharge is 10%, regardless of the total income.
The following rates apply to foreign companies for AY 2020-21 based on their billing:
|type of income||Tax rate|
|Royalties or fees for technical services from the government or an Indian company under an agreement made before 1 April 1976 and approved by the central government||50%|
|all other recipes||40%|
In addition to the above prices:
|If the total income exceeds Rs. 1 crore but not Rs. 10 crores||7% of the tax calculated on the national company / 2% of the tax calculated on the foreign company according to the previous rates|
|If the total income exceeds Rs. 10 crores||12% of the tax calculated on the national company / 5% of the tax calculated on the foreign company according to the previous rates|
Health and Education Tax:An additional 4% calculated income tax and applicable surcharge will be added to the total amount of tax due before this charge.
Alternative Minimum Tax (MAT):Alternatively, all companies (including foreign ones) must pay a minimum alternative tax of 15% on accounting profits, when the tax calculated according to the previous rates is less than the15% of the accounting result. This applies if the business does not elect Section 115BAA or Section 115BAB.
All about the income statement
Term to submit the Income statement
Companies, including foreign ones, must submit their income statements before October 30 of each year. Even if the company was incorporated in the same tax year, you must also file the income tax return for that period by October 31. For the 2019-2020 fiscal year (AY 2020-21), the expiration date has been extended to November 30, 2020 due to the pandemic.
Tax return forms to be filed by the company
RTI 6: All businesses, except businesses claiming a section 11 deduction, must file their return using Form ITR 6.RTI 7: All companies registered under Section 8 of the Companies Act 2013 must file their return using Form ITR 7.
The Income Tax Law requires a class of companies to audit their accounts and submit an audit report to the IT department together with the income tax return. This test is known astax audit. Authorized companies are also required to submit this tax audit report before September 30. However, for the 2019-20 tax year (AY 2020-21), the tax audit report deadline is October 31, 2020. Corporate income tax is an ocean of regulations that all businesses must comply with. . Read on to find out what these regulations and rules are for businesses to follow.
What is the windfall tax? Learn about unexpected tax rate, percentages, examples, advantages, disadvantages and its impact on crude oil, ONGC, oil companies in India.
- Form No. 10-IB of the Income Tax Law (ITA).
Form #10-IB offers domestic companies, start-ups, and individuals involved in manufacturing the opportunity to claim a reduced tax rate of 25% of total income.(Video) New Tax Rates for Company AY 2020-21 by CA Vivek Goel
- Taxation of spirits and related products
The states and union territories in India have different approaches to taxing and regulating alcohol. Read here for more information on spirits taxes
- Fine according to the Income Tax Law
An appraiser who violates the provisions of the Income Tax Act of 1961 will be penalized.
- § 115BAB - Corporate tax rate for new manufacturing companies
The Taxation Act (Amendment) Ordinance 2019 inserted Section 115BAB, which offers new manufacturing companies a tax rate of 15%. Read more here.
- Section 115BAA - New tax rate for domestic corporations
Article 115BAA establishes that national companies have the option of paying taxes at a rate of 22% plus 10% sc and 4%. The effective tax rate is 25.17% as of the 2019-20 fiscal year (YY 2020-21) when these domestic companies meet certain specific conditions. The company does not have to pay taxes
- Personal income tax exemption for angel investors in startups
The Indian government announced that angel investors would receive an exemption on their investments in startups. Read more about this exception here
- BEPS - Base Erosion and Profit Shifting
The BEPS indicate the tax evasion strategies used by multinational companies to reduce their tax bases. This led to the initiation of the BEPS project. Read more about it here.
- Tax benefits for companies
A brief summary of all the tax advantages for companies.
- Article 54 of the Income Tax Law - Exemption of Capital Gains
§ 54 EStG(Video) CORPORATE TAX PART-1||MEANING AND TYPES OF TAX||DIFFERENCE BETWEEN TAX||BY Dr.RK Singh(in Hindi)
- unabsorbed depreciation
Unabsorbed depreciation is the amount of unused depreciation that the beneficiary cannot claim as an expense due to lack of sufficient earnings.
- Out-of-pocket expenses allowed as deductible expenses
The Income Tax Law states that cash payments above INR 20,000 in a single day are not allowed as a deductible expense.
- Depreciation according to the income tax law
Depreciation, as defined by the Income Tax Law, is the decrease in the real value of a tangible asset due to use, wear and tear or obsolescence.
- Additional depreciation under the Income Tax Law
Additional depreciation under the Income Tax Law, 20% of the actual cost will be allowed for any newly purchased and installed machinery or equipment used for less than 180 days
- initial cost amortization
Expenses incurred before starting the business or during the expansion of an existing business or the establishment of a new entity, etc. deductible under Section 35D of the Income Tax Act of 1961.
- Section 43B of the Income Tax Act of 1961
Some expenses are only deductible when actually paid. These expenses fall under Section 43B of the Income Tax Law. More details on Section 43B deductions can be found here shortly.
- u/s 36 Deductions – An Overview
Article 36 of the Income Tax Law establishes a series of expenses that are admissible as a deduction from commercial and professional income. Here you will find the summary of u/s 36 deductions and a detailed explanation of all u/s 36 deductions.
- Expenses not allowed by the PGBP
No payment will be accepted in which an amount must be deducted and paid to the government and the same is not deducted or remains unpaid. For more information on expenses not allowed by the PGBP, read here.(Video) What is Minimum Alternate Tax in Hindi | MAT | Computation of Book profit | Corporate tax | MCom |
- Deferred tax assets and deferred tax liabilities
The deferred tax liability (DTL) or deferred tax asset (DTA) element forms an important part of your financial statements. We've written all about DTL/DTA, how it's calculated and some specific implications...