Corporate Tax in India
- Tax Base For Resident and Foreign Companies
- Resident companies are subject to tax on gross worldwide income while non-resident companies are taxed only on Indian-source income.
|Corporate tax rate||30% for domestic companies and 40% for foreign companies and branches of foreign companies.|
|Surcharge||10% (2,5% for foreign companies) if turnover in excess of INR 10 millions.|
|Secondary and higher education cess||1%|
|Cess applicable to the aggregate amount of income tax plus the surcharge||3%.|
|Effective tax rate||30.9% and 33.99%|
- Tax Rate For Foreign Companies
- Non-resident companies and branches of foreign companies are taxed at a rate of 40% and a cess of 3% bringing the effective tax rate to 41.2% , and 42.23%.
- Capital Gains Taxation
Long-term capital gains: 20% flat with indexation or 10% flat without indexation.
Short-term capital gains: 10%.
Gains from the sale of long-term capital assets are exempt from capital gains tax if they are reinvested in certain securities within six months and locked in for three years.
- Main Allowable Deductions and Tax Credit
Specific deductions are allowed:
- A 100% deduction for interest payments on borrowed capital,
- Capital expenditure on research conducted in-house and for payments made for scientific research to specified organizations,
- Interest, royalties and fees paid outside of India to overseas affiliates or in India to a non-resident provided tax as required is withheld,
- Payments to employees under voluntary retirement schemes may be deducted over five years,
- Business losses (conditions apply).
Indian tax law does not permit companies to take a deduction for a general bad-debt reserve, although specific bad debts may be deducted when written off. For additional information, consult the Deloitte Tax Guide.
- Other Corporate Taxes
- A minimum alternative tax (MAT) is also imposed on corporations. If a company's tax liability is less than 10% of book profits, the book profits are deemed to be total income and are charged to tax at 10%, plus the applicable surcharge and cess.
A ‘fringe benefits tax' of 30% is imposed on the value of fringe benefits that companies provide or are deemed to provide to their employees.
Country Comparison For Corporate Taxation
|India||South Asia||United States||Germany|
|Number of Payments of Taxes per Year||60.0||31.1||11.0||16.0|
|Time Taken For Administrative Formalities (Hours)||271.0||282.9||187.0||215.0|
|Total Share of Taxes (% of Profit)||71.5||39.9||46.8||48.2|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
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