For income tax rates, the company is divided into two categories, domestic and foreign company. We have a concessional rate of income tax for domestic companies, whereas, other companies are charged at a higher rate of 40%.
Income tax rate on a domestic company
In the case of a domestic company, if the total turnover or the gross receipt in the previous year 2020-2021 does not exceed 400 Crore rupees, then income tax rate will be 25% of the total income.
For other domestic companies, the income tax rate is 30% of the total income. This means, if the total turnover or the gross receipts in the financial year 2020-21, exceed 400 crore rupees, then income tax rate will be 30% instead of 25%.
Surcharge on income tax applicable to a domestic company
If the total income is exceeding 1 Crore rupees but not exceeding 10 Crore rupees, then surcharge at the rate of 7% will be levied on the income tax computed on total income of the domestic company.
Where the total income of the domestic company is exceeding 10 crore rupees, instead of 7%, the rate of surcharge will be 12%.
Government has provided marginal relief in case of surcharge.
In case, a company’s total income is exceeding 1 Crore rupees but does not exceed 10 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 1 Crore by more than the amount of income that exceeds 1 Crore.
If the total income is exceeding 10 Crore, 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 10 crore rupees by more than the amount of income that exceeds 10 Crore.
Table showing income tax rates applicable to a domestic company in India;
In case of a domestic company where its total turnover or the gross receipt in the previous year 2020-2021 does not exceed 400 Crore rupees | 25% of the total income |
In other cases | 30% of the total income |
The amount of income tax as increased by the applicable surcharge shall be further increased by Health and Education Cess calculated at the rate of 4% on such income tax and surcharge.
A company shall be liable to pay minimum alternate tax at the rate of 15% of book profit where the normal tax liability of the company is less than 15% of book profit. Surcharge and health and education cess will also be levied on such income tax.
In case the company has opted for section 115BA, 115BAA or 115BAB, then lower income tax at the rate of 25%, 22% and 15% will be levied instead of the normal rate of income tax charged on domestic companies.
Table showing surcharge rates applicable to domestic companies;
If total income exceeds Rs. 1 crore but not Rs. 10 Crore | Surcharge rate is 7% of tax calculated |
If total income exceeds Rs. 10 crore | Surcharge rate is 12% of tax calculated |
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?
Nature of income | Income tax rates |
Royalty received or fees for technical services from government or any Indian concern under an agreement made before April 1, 1976 and approved by central government | 50% |
Any other income | 40% |
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;
If total income exceeds Rs. 1 crore but not Rs. 10 Crore | Surcharge rate is 2% of tax calculated |
If total income exceeds Rs. 10 crore | Surcharge rate is 5% of tax calculated |