Corporate Tax Rates In India: Overview, Tax Rates & Returns

Corporate tax affects how much profit a company keeps after meeting its legal obligations. It is not just a year-end formality. It shapes pricing, expansion plans, and long-term strategy. Understanding how corporate tax works in India helps businesses plan better and file tax returns accurately, without last-minute surprises.

At its core, corporate tax rates in India are charged on a company’s taxable income. This includes revenue left after deducting expenses like cost of goods sold, salaries, rent, depreciation, and research costs.

Knowing what qualifies as deduction and how it reflects in tax filings often makes the difference between overpaying and paying correctly.

What Counts as a Corporate Entity

Under the Income Tax Act, corporate includes companies incorporated in India or abroad. It also covers institutions or bodies assessed as companies for tax purposes. In certain cases, tax authority can declare an entity to be treated as a corporate for a specific year.

In simple terms, if an entity earns income through business activities and is assessed as a company, corporate tax applies. How that entity is classified directly influences company tax rate India applies to its income.

Types of Corporations in India

Corporations fall into two broad categories.

Domestic companies

These are companies registered in India and managed entirely within the country. Even an Indian arm of a foreign business can fall here if control stays in India.

Foreign companies

These are companies incorporated outside India or managed partly from abroad, but earning income from Indian sources.

This distinction matters because the company tax rate India applies is different for each category.

Income That Attracts Corporate Tax

A company rarely earns from just one source. Taxable income may include:

• Profits from business or professional activities
• Interest and dividend income
• Capital gains from asset sales
• Rental income from property

The business tax slab in India depends on income classification and tax regime chosen, as companies are taxed at prescribed rates rather than progressive income slabs.

Corporate Tax Rates for Domestic Companies

Domestic companies can choose between different tax regimes, depending on eligibility and incentives claimed.

For AY 2026–27, the key rates are:

• Companies with turnover up to ₹400 crore under Section 115BA: 25%
• Companies opting for Section 115BAA: 22%
• New manufacturing companies under Section 115BAB: 15%
• Other domestic companies: 30%

Once surcharge and health and education cess are added, the effective rate changes. Many companies now opt for the 22% regime since it simplifies compliance and lowers the overall burden.

These slabs form the backbone of current corporate tax rates in India for domestic entities.

Corporate Tax Rates for Foreign Companies

Foreign companies pay tax based on the nature of income earned in India.

• Royalty or technical service fees under old approved agreements: 50%
• Other income earned in India: 40%

Surcharge applies if income crosses ₹1 crore, followed by 4% health and education cess. The final outflow can be significant, which makes planning essential for cross-border businesses.

Minimum Alternate Tax Explained Simply

Minimum Alternate Tax exists to ensure companies with large book profits do not pay negligible tax due to exemptions.

MAT is charged at 15% of book profits for most companies. Units in International Financial Services Centres (IFSCs) may pay lower rate of 9% if income is earned in foreign exchange.

Companies opting for Sections 115BAA or 115BAB are exempt from MAT. If MAT paid is higher than regular tax, the excess becomes a credit. This credit can be carried forward for up to 15 years and adjusted later.

Indian tax law includes more than one minimum tax provision to ensure that profitable entities pay a basic level of tax, even when exemptions reduce their regular taxable income. Because these provisions apply to different taxpayers and situations, they are often misunderstood. For clear breakdown of how Minimum Alternate Tax applies and how it differs from Alternate Minimum Tax, you can refer to our guide: Minimum Alternate Tax & Alternate Minimum Tax  

Dividend Taxation After 2020

Companies do not pay Dividend Distribution Tax (DDT). Dividends are now taxed in hands of shareholders, as per their applicable income tax slab.

However, companies must deduct TDS at 10% if dividend payments exceed ₹5,000 in a financial year. This change reduced the corporate tax burden but increased compliance requirements around deduction and reporting.

Corporate Tax Planning That Actually Works

Tax planning is not about avoidance. It is about timing and structure.

• Plan capital gains carefully
• Use depreciation benefits under Section 32
• Track eligible donations under Section 80G
• Claim employment-related deductions under Section 80JJAA

Advance planning allows companies to defer income or spread liabilities across years. Many businesses now rely on a corporate tax calculator in India to estimate liability early and make informed decisions.

Professional review at this stage often helps identify missed deductions and reduces filing errors before they become costly.

Filing Corporate Tax Returns on Time

Deadlines depend on audit requirements.

• Companies requiring audit must file returns by 31 October
• Non-audit cases must file by 31 July

Most companies file ITR-6. Section 8 companies use ITR-7. Missing deadlines leads to penalties and interest, which add up quickly.

How Companies Can Reduce Tax Burden Legally

Three areas make the biggest difference.

1. Expense management: Accurate records of wages, overheads, and production costs allow legitimate deductions.
2. Valuation choices: In specific cases, inventory valuation methods can affect taxable income.
3. Using deductions properly: Understanding what applies to your business avoids missed opportunities.

The right balance matters. Overuse of one method can trigger scrutiny.

Conclusion

Understanding corporate tax rates in India is no longer optional for growing businesses. The right tax regime, timely filings, and informed planning directly affect profitability. While rules change, the basics remain steady. Know your slab. Track your income. Plan ahead.

For businesses that want clarity without digging through legislation, our team at LegalWiz offers practical support. From planning to income tax return filing, having the right guidance saves both time and money.