What You Need to Know About India Corporate Tax

India gives companies a choice that most countries do not: pay 30% and keep your deductions, or lock in a flat 22% effective rate under Section 115BAA and give them up forever. That single decision shapes your entire tax strategy. This post breaks down both regimes, the advance tax calendar, and the filing requirements so you can pick the path that saves your company the most.

1. What is Corporate Tax?

Corporate tax is a direct tax levied on the net income or profits of companies registered in India. The Income Tax Department administers corporate tax under the Income Tax Act, 1961. India offers two main tax regimes for domestic companies:

Standard regime: 30% tax rate with access to exemptions and deductions
Section 115BAA regime: Reduced 22% rate (effective 25.17% with surcharge and cess) but you give up most exemptions
Section 115BAB regime: 15% rate (effective 17.16%) for new manufacturing companies set up before 31 March 2024

Foreign companies operating in India pay 40% on their Indian-sourced income.

2. Who does it apply to?

This usually applies to:

Private limited companies registered in India
Public limited companies listed or unlisted
One Person Companies (OPCs)
Foreign companies earning income in India
Limited Liability Partnerships (LLPs) taxed at 30%
Companies incorporated under the Companies Act, 2013

3. Why does it matter?

Understanding corporate tax helps you:

Stay compliant with tax laws
Avoid penalties and late fees
Keep proper records
File and pay correctly
Plan your cash flow better

4. How does it work?

Here's the basic process:

Calculate your company's total income from all sources during the financial year
Deduct all allowable business expenses and depreciation
Apply any eligible exemptions or deductions (standard regime) or opt for 115BAA/115BAB
Calculate taxable income and apply the applicable tax rate
Add surcharge (7% or 12% depending on income) and 4% health and education cess
Subtract any advance tax payments and TDS credits
Pay advance tax in quarterly installments during the year
File your income tax return (ITR-6) by the due date

5. What forms are involved?

ITR-6 - Annual income tax return for companies (not claiming exemption under Section 11)
Form 29B - Report for Minimum Alternate Tax (MAT) under Section 115JB
Form 3CD - Tax audit report filed with the return
Form 3CEB - Report for international transactions (transfer pricing)
Advance Tax Challan (Challan 280) - For quarterly advance tax payments
Form 26AS - Annual tax credit statement showing TDS/TCS credits

6. What information do you need?

Before handling corporate tax, make sure you have:

Company PAN and TAN
Audited financial statements (balance sheet, profit and loss account)
Details of all income sources (business, capital gains, other)
Schedule of depreciation on assets
Records of all TDS deducted and deposited
Advance tax payment challans
Transfer pricing documentation (if applicable)
Board resolution authorizing the tax return signatory

7. Important deadlines

Advance tax (first installment): 15 June (15% of estimated tax)
Advance tax (second installment): 15 September (45% cumulative)
Advance tax (third installment): 15 December (75% cumulative)
Advance tax (fourth installment): 15 March (100%)
ITR-6 filing (with audit): 31 October of the assessment year
ITR-6 filing (transfer pricing cases): 30 November of the assessment year
Year-end requirements: Get books audited, prepare financial statements, reconcile TDS credits with Form 26AS

8. Common mistakes to avoid

Not paying advance tax on time and incurring interest under Sections 234B and 234C
Choosing 115BAA without fully evaluating whether existing deductions are more beneficial
Forgetting that the 115BAA election is permanent and irrevocable
Incorrectly calculating MAT liability under the standard regime
Not maintaining proper transfer pricing documentation for related party transactions
Missing the distinction between business income and capital gains
Failing to reconcile TDS credits before filing the return

9. Simple example

Your company earns INR 1 crore in revenue and has INR 70 lakh in deductible expenses.

Under Section 115BAA (22% regime):

Taxable income: INR 1,00,00,000 - INR 70,00,000 = INR 30,00,000
Tax at 22%: INR 6,60,000
Surcharge at 10%: INR 66,000
Health and education cess at 4%: INR 29,040
Total tax liability: INR 7,55,040
Effective tax rate: approximately 25.17%

Under Standard regime (30%):

Same taxable income: INR 30,00,000
Tax at 30%: INR 9,00,000
Plus surcharge and cess
But you can claim deductions under Sections 80IA, 80IB, etc.

Most companies opt for 115BAA unless they have significant deductions under the standard regime.

10. FAQ

Q: Can a company switch back from 115BAA to the standard regime? A: No. Once you opt for Section 115BAA, the choice is permanent and irrevocable. You cannot go back to claim deductions or exemptions under the standard regime.

Q: What is MAT and does it apply under 115BAA? A: MAT (Minimum Alternate Tax) is a minimum tax of 15% on book profits. Companies under Section 115BAA are exempt from MAT.

Q: Do foreign companies pay a different rate? A: Yes. Foreign companies pay 40% on income sourced from India. They are not eligible for Section 115BAA.

Q: What happens if I miss advance tax deadlines? A: You pay interest at 1% per month under Section 234C for each missed installment and 1% per month under Section 234B if total advance tax paid is less than 90% of the assessed tax.

Q: Is LLP taxed like a company? A: LLPs are taxed at a flat rate of 30% plus surcharge and cess. They file ITR-5 instead of ITR-6 and are not eligible for Section 115BAA.

11. Final takeaway

Choosing the right tax regime and staying on top of advance tax deadlines can save your company significant money and keep you out of trouble with the Income Tax Department.

Caption

What you need to know about India Corporate Tax: Understand the tax regimes (22% vs 30%), advance tax deadlines, and filing requirements to keep your company compliant and tax-efficient.

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