A corporate tax comprises a tax on the net Income or profits of a corporation. Corporate tax is imposed on a company’s taxable Income, which includes the company’s revenue following deductions such as the cost of goods sold (COGS), depreciation, general and administrative (G&A) costs, selling and marketing expenses, and research and development. Meticulous management of these costs can be a helpful aid in conserving corporate tax and reducing the loss of Income through taxation.
Corporate tax or company tax constitutes an Income Tax for income earned by a corporation. In this article, we review the company tax rate and income tax slab applicable to companies.
Domestic companies are registered under the Indian Companies Act and have their management and business wholly based in India. On the contrary, foreign corporations are companies that are not registered under the Indian Companies Act and have their management and base outside India.
Foreign corporations are due for corporate taxes in India solely on the income earned inside the country. Nevertheless, domestic corporations are taxed on their general income.
Income of a Company
A corporation or company can have diverse sources of income. The tax rates the company will use to assess its tax liability will be based on these incomes. A company can have the specified sources of income in a financial year:
- Gains and profits from business activities
- Capital gains from the sale of assets
- Interest and dividend income from treasury operations
- Rental income from property
Corporate Tax Rates AY 2025-26
Domestic Company
Income-tax rates prevalent with regard to domestic companies for assessment years 2025-26 and 2024-25 as specified:
| Domestic Company | Assessment Year 2025-26 | Assessment Year 2024-25 |
| Where its gross receipt or total turnover during the earlier year 2021-22 does not surpass Rs. 400 crore | NA | 25% |
| Where its total turnover or gross receipt during the earlier year 2022-23 does not exceed RS. 400 crores | 25% | NA |
| Any other domestic company | 30% | 30% |
Include:
- Surcharge: The amount of income tax shall be raised by a surcharge at the rate of 7% of such tax where total Income surpasses one crore rupees but not more than ten crore rupees and at the rate of 12% of such tax, where total Income goes beyond ten crore rupees. The surcharge shall be liable to partial relief, specified as under:
- Where Income surpasses Rs. 1 crore but not beyond Rs. 10 crores, the total amount due as income tax and surcharge shall not go beyond the total amount payable as income tax on the total Income of Rs. 1 crore, by the amount of Income that exceeds Rs. 1 crore.
- Where Income surpasses Rs. 10 crores, the total amount due as income tax and surcharge shall not go beyond the total amount owing as income tax on the total Income of Rs. 10 crores by more than the amount of Income that surpasses Rs. 10 crores.
- Health and Education Cess: The amount of income tax and the prevalent surcharge shall be further raised by health and education cess computed at the rate of 4% of such income tax and surcharge.
Minimum Alternate Tax (MAT)
A domestic company is subject to pay Minimum Alternate Tax where tax due by it, on total income calculated as per standard provisions of the Act, is under 15% of ‘book profit.’ In such an event, the ‘book profit’ is considered as the Income of the company, and it shall be subject to pay tax at the rate of 15% of such ‘book profit.’
Nonetheless, Mat is charged at the rate of 9% (plus surcharge and cess as applicable) in the case of a company as part of a unit of an International Financial Services Centre and sourcing its Income only in convertible foreign exchange.
Exclusive Tax Rates Pertaining to a Domestic Company
The special Income Tax rates prevalent in the case of domestic companies are as specified:
Domestic Company
- Where it opted for Section 115BA, 25%
- Where it opted for Section 115BAB 15%
- Where it opted for Section 115BAA 22%
Surcharge: The rate of surcharge in the event of a company preferring taxability under Section 115BAA or Section 115BAB shall be uniform 10%, regardless of the amount of total income.
MAT: The domestic company that has picked a special taxation regime under Section 115BAA & 115BAB is exempted from the MAT provision. However, no exemption is available in cases where Section 115BA has been selected.
Health and Education Cess: The amount of income tax and the prevalent surcharge shall be further raised by health and education cess computed at the rate of 4% of such income tax and surcharge.
Foreign Company
The following rates are applicable to foreign companies from AY 2025-26 based on their turnover:
| Nature of Income | Tax Rate |
| Royalty obtained or fees for technical services from any Indian concern or government under an agreement made before April 1, 1976, and accepted by the central government | 50% |
| Any other income (From AY 2020-21 to AY 2024-25) is taxed at 40%. | 35% |
A resident company is taxed on its global income. A non-resident company is taxed solely on income that is obtained in India, or that arises or accrues, or is deemed to arise or accrue in India.
Corporate Income Tax Rates – Assessment Year 2025-26
The corporate income tax (CIT) rate pertaining to an Indian company and a foreign company for the tax year 2025/26 is as specified:
| Income | Category | Basic CIT Rate (%) | *Effective CIT Rate (%) ** |
|---|---|---|---|
| Less than INR 10 million | Turnover ≤ INR 4 billion (FY 2023–24) | 25 | 26.00 |
| Other Domestic Companies | 30 | 31.20 | |
| Foreign Companies (with PE in India) | 35 | 36.40 | |
| More than INR 10 million but < INR 100 million | Turnover ≤ INR 4 billion (FY 2023–24) | 25 | 27.82 |
| Other Domestic Companies | 30 | 33.80 | |
| Foreign Companies (with PE in India) | 35 | 37.13 | |
| More than INR 100 million | Turnover ≤ INR 4 billion (FY 2023–24) | 25 | 29.12 |
| Other Domestic Companies | 30 | 34.94 | |
| Foreign Companies (with PE in India) | 35 | 38.22 |
Note: Effective tax rates include surcharge and health and education cess. Resident companies: 0% or 7% or 12% surcharge, as per Income. For non-resident corporations, the rate of tax is 0%, 2% or 5% depending on the Income. The rate of health and education cess is 4%.
A partnership firm, limited liability partnership, or a local authority must pay income tax at 30% of the average taxable Income.
Dividend Distribution Tax
With the Finance Act 2020, dividends from domestic firms are taxable in the possession of recipients, while the firm is no longer liable to pay a distribution tax. Nonetheless, the distributing firm needs to deduct TDS at a rate of 10% for dividend payments exceeding Rs 5,000.
Wrapping Up
Effective corporate tax planning is essential for maximizing profitability and ensuring compliance with tax regulations. Companies can significantly reduce their tax liabilities by understanding prevailing tax rates, managing expenses strategically, and utilizing allowable deductions. This approach conserves Income and also upholds sustainable business development and financial stability.
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