Corporate Tax in India

Overview by
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.

Tax Rate

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.
Education cess 2%
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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