Corporate tax rates in India for FY 2024-25 (AY 2025-26)

Understanding corporate tax rates is crucial for businesses operating in India. The taxation framework is governed by the Income Tax Act of 1961, which outlines different tax rates based on the company’s residency status and turnover. 

This article provides a detailed overview of corporate tax rates for the financial year 2024-25, along with important compliance requirements.

In India, companies are classified as either resident or non-resident.

• Resident companies are taxed on their global income.
• Non-resident companies are taxed only on income that is received in India or that accrues, arises, or is deemed to accrue or arise in India.

Corporate Tax Rates for FY 2024-25 (AY 2025-26)

Domestic companies with a turnover of up to 400 crore rupees are taxed at the rate of 25%.

For companies with a turnover exceeding 400 crore rupees the tax rate is 30%.

The tax rate for foreign companies is generally 40%. Foreign companies are those companies that are incorporated outside India but have a business presence in India.

Companies incorporated on or after October 1, 2019, and that meet certain conditions can opt for a reduced tax rate of 15%.

Surcharge is applicable to companies. Surcharge is applicable based on the income level (7% for income between 1 crore to 10 crore rupees, and 12% for income above 10 crore rupees).

An additional 4% is levied towards Health and Education Cess on the income tax and surcharge.

For companies that pay lower taxes due to exemptions, MAT is applicable at a rate of 15% on book profits. MAT is applicable when companies that benefit from tax exemptions or incentives and end up paying little or no tax.

Companies are not tax based on income tax slab as applicable to an individual.

This table summarizes the income tax rates for domestic companies for the financial year 2023-24 (AY 2024-25) and financial year 2024-25 (AY 2025-26) based on various conditions.

Surcharge on Income Tax

Surcharge is an additional fee applied to individuals or companies whose income exceeds certain thresholds. This surcharge is calculated based on the income tax amount determined by the applicable tax rates. 

Here are the specific surcharge rates:

• 7%: For taxable income exceeding ₹1 crore and up to ₹10 crore.
• 12%: For taxable income exceeding ₹10 crore.
• 10%: For companies opting for taxation under Sections 115BAA or 115BAB.

This surcharge is intended to increase the tax contribution of higher income earners.

Marginal Relief is a relief from surcharge, provided in cases where the surcharge payable exceeds the additional income that makes the person liable for surcharge. The amount payable as surcharge shall not exceed the amount of income earned exceeding ₹ 1 crore and ₹ 10 crore respectively

A Health and Education Cess of 4% is applicable on the total amount of income tax, including any surcharge that may be levied.

Filing income tax return

Companies must file their income tax returns annually in ITR-6. For companies, the due date for filing income tax form ITR-6 is 31st October of the relevant assessment year. 

If the company is required to undergo a tax audit under section 44AB, then a tax audit report has to be submitted in Form 3CA-3CD on or before 30th September of the relevant assessment year.

Companies with a turnover exceeding 1 crore rupees (10 crore rupees for certain businesses) are required to have their accounts audited by a qualified practicing chartered accountant.

Additional Compliance with Regulations

Companies must comply with several regulations, including:

• Transfer Pricing: Ensuring fair pricing for transactions with related parties.
• Advance Tax: Payment in four installments throughout the financial year based on estimated income.
• Tax Deducted at Source (TDS): Deducting TDS on specific payments and filing quarterly returns.
• If applicable, companies must register for Goods and Services Tax (GST), charge tax accordingly, and file GST returns, including GSTR-1 (sales), GSTR-3B (summary), and annual returns (GSTR-9).

Depending on the business’s nature and complexity, there may be additional legal compliance requirements.

Tax laws can be complex and may change frequently. Companies should consult tax professionals to improve their tax strategies and stay compliant with the latest rules. This approach helps businesses manage corporate taxation in India more easily.

Frequently asked questions – FAQs

What is a domestic company?

As per section 2 (22A) of the income tax act, 1961, “domestic company” means an Indian company, or any other company which, in respect of its income liable to tax under this Act, has made the prescribed arrangements for the declaration and payment, within India, of the dividends (including dividends on preference shares) payable out of such income.

What is an Indian company?

An Indian company is defined under section 2(26) of the Income tax act, 1961.

As per section 2(26), “Indian company” means a company formed and registered under the Companies Act, 1956 or the new Companies act 2013, and includes—

(i) a company formed and registered under any law relating to companies formerly in force in any part of India (other than the State of Jammu and Kashmir and the Union territories specified in sub-clause (iii) of this clause) ;

(ia) a corporation established by or under a Central, State or Provincial Act ;

(ib) any institution, association or body which is declared by the Board to be a company under clause (17);

(ii) in the case of the State of Jammu and Kashmir, a company formed and registered under any law for the time being in force in that State ;

(iii) in the case of any of the Union territories of Dadra and Nagar Haveli, Goa, Daman and Diu, and Pondicherry, a company formed and registered under any law for the time being in force in that Union territory :

Provided that the registered or, as the case may be, principal office of the company, corporation, institution, association or body in all cases is in India ;

What is the income tax rates applicable to a foreign company?

If total income of the foreign company is exceeding 1 Crore rupees but not exceeding 10 Crore rupees, then surcharge at the rate of 2% is to be paid on such income tax. If total income is exceeding 10 crore rupees, surcharge rate is 5% instead of 2%.

Table showing surcharge rates applicable to foreign companies;