A resident company in India is taxed on its worldwide income where as a non-resident company is taxed only for its income received in India. Companies must pay income tax on their taxable profit based on the rate of tax applicable to the financial year.
If you are a new company, one of the first things you should do is to register with income tax department by applying for a PAN (Permanent Account Number). Each year company must file its income tax return in ITR6.
In this article, we will take an overview of the corporate tax rates applicable in India for the tax year 2017-18 and 2016-17.
Domestic companies are taxed at the rate of 30% of total income. However, with effect from tax year 2017-2018, tax rate for domestic companies with turnover or gross receipt not exceeding Rs. 50 Crore in the previous year 2015-16 are liable to pay tax at the rate of 25% instead of 30% (Proposed in Budget 2017). This means, if your turnover for the financial year 2015-16 is less than or equal to 50 Crore rupees then tax rate for the previous year 2017-18 will be 25%.
Up to tax year 2016-17, income tax rate is 30% for all type of domestic companies. For domestic companies with turnover of more than Rs. 50 Crore (in the previous year 2015-16) are liable to pay tax at the rate of 30% (Proposed in Budget 2017).
Tax rate (25% or 30%) for previous year 2017-18 will be determined based on the turnover of the previous year 2015-16.
In addition to the above tax rates, companies are also liable to pay surcharge and cess.
A domestic company will be charged surcharge at the rate of 7% on income tax if taxable income exceeds 1 Crore rupees but less than or equal to 10 Crore rupees. If taxable income is more than 10 crore rupees then surcharge will be @ 12%.
Cess at the rate of 3% (i.e. education cess @2% and Secondary and higher secondary cess @1%) will also be levied on the total of income tax and surcharge. It’s applicable to all categories of company irrespective of turnover and taxable income.
Income tax rate on companies for tax year 2017-18 – Assessment Year 2018-2019
| Turnover in Indian Rupees |
Base Tax rate (Proposed in Budget 2017) |
|
|
For Indian Company |
For Foreign Company |
|
| Less than or equal to 50 Crore (in the previous year 2015-16) |
25% |
40% |
| More than 50 Crore (in the previous year 2015-16) |
30% |
40% |
Surcharge on companies for tax year 2017-18 – Assessment Year 2018-2019
|
Taxable Income (In Indian Rupees) |
Surcharge charged on Income tax |
|
|
For domestic Company |
For Companies other than a domestic Company |
|
| Less than or Equal to 1 Crore |
NIL |
NIL |
| More than 1 Crore but less than 10 Crore |
7% |
2% |
| More than 10 Crore |
12% |
5% |
Provided that in the case of every company having a total income exceeding one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees:
Provided further that in the case of every company having a total income exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
Income tax rate for tax year 2016-2017 – Assessment Year 2017-18
|
Income in Indian Rupees |
Tax rate in Percentage |
|||
|
For Indian Company |
For Foreign Company |
|||
|
Basic Rate |
Effective tax Rate after including surcharge, education cess and secondary and higher secondary education cess |
Basic Rate |
Effective tax Rate after including surcharge, education cess and secondary and higher secondary education cess |
|
| Less than 10 million | 30 | 30.9 | 40 | 41.2 |
| More than 10 million but less than 100 million | 30 | 33.063 | 40 | 42.024 |
| More than INR 100 million | 30 | 34.608 | 40 | 43.26 |
| Surcharge is payable only where total taxable income exceeds INR 10 million | ||||
| Basic tax rate in case the total turnover during the tax year 2014/15 does not exceed INR 50 million is 29% | ||||
Provided that in the case of every company having a total income exceeding one crore rupees but not exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of one crore rupees by more than the amount of income that exceeds one crore rupees.
Provided further that in the case of every company having a total income exceeding ten crore rupees, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of ten crore rupees by more than the amount of income that exceeds ten crore rupees.
What is tax year?
A company’s accounting period for Corporation Tax begins on the day it becomes active for income tax and ends on 31st march. It’s known as tax year.
Tax year are normally 12 months long and they usually correspond with the financial year in the company’s annual accounts. A tax year can be shorter than 12 months (in case of newly incorporated companies), but it cannot exceed 12 months.
Your company’s tax liability is calculated by multiplying taxable profits by the tax rates as discussed above.
Companies are also liable to pay minimum alternate tax on their adjusted book profit where the tax liability under normal provision (excluding surcharge, education cess, and secondary and higher education cess) of the Income-tax Act, 1961 for the financial year is not more than 18.5% (excluding surcharge, education cess, and secondary and higher education cess) of such book profits.
