Business Tax
Corporate Tax
A simple guide to corporate tax rates, deductions, MAT, compliance and tax planning for companies in India.
Normal Rate
25% / 30%
Section 115BAA
22%
Health & Education
4% Cess
MAT
15%
Return
ITR-6
Overview
What is Corporate Tax?
Corporate tax is a direct tax on the taxable income of companies. The tax payable depends on factors such as company type, income, deductions and the tax regime selected.
Domestic Company
Tax treatment depends on the applicable regime and conditions.
Foreign Company
Different provisions may apply to foreign companies.
Taxable Income
Tax is calculated on taxable income, not simply accounting profit.
AY 2026–27
Corporate Tax Rates
For Assessment Year 2026–27, the normal corporate tax rate depends on the company's applicable category.
25%
Generally applies to eligible domestic companies with turnover or gross receipts not exceeding ₹400 crore, subject to applicable conditions.
30%
Generally applies to other domestic companies under the normal corporate tax provisions.
Concessional Regime
Section 115BAA
22% Base Tax Rate
Eligible domestic companies may opt for Section 115BAA, subject to prescribed conditions.
10%
Prescribed surcharge.
4%
Health & Education Cess.
No MAT
Generally not subject to MAT.
The effective tax rate under Section 115BAA is generally around 25.17%, including surcharge and cess.
Manufacturing
Section 115BAB
Section 115BAB provides a concessional tax regime for eligible new domestic companies engaged in manufacturing or production, subject to statutory conditions and commencement requirements.
Eligibility depends on specific statutory conditions. Companies should verify the current requirements before choosing this regime.
Additional Tax
Surcharge & Cess
7%
Generally where total income exceeds ₹1 crore but does not exceed ₹10 crore.
12%
Generally where total income exceeds ₹10 crore.
4%
Health & Education Cess on income tax plus surcharge.
Calculation
How Corporate Tax is Calculated
1. Determine Total Income
Identify the company's income under applicable tax provisions.
2. Allow Expenses & Deductions
Apply eligible business expenses, depreciation and deductions.
3. Adjust Disallowances
Account for expenses or items restricted under tax law.
4. Apply Tax Rate
Apply the applicable corporate tax regime and add surcharge and cess.
Expenses
Allowable Business Expenses
Companies may claim legitimate business expenses and deductions subject to the Income-tax Act.
Employee salaries and benefits
Rent and operating expenses
Depreciation on eligible assets
Interest on eligible business borrowings
Professional and legal expenses
Certain R&D expenditure
Allowable bad debts
Eligible carried-forward losses
Not every business expense is automatically deductible. Statutory conditions must be satisfied.
Minimum Tax
Minimum Alternate Tax (MAT)
15% of Book Profit
For AY 2026–27, MAT is generally 15% of book profit plus applicable surcharge and 4% Health & Education Cess.
IFSC Units
Eligible IFSC units may be subject to MAT at 9%, subject to prescribed conditions.
115BAA / 115BAB
Companies using these concessional regimes are generally exempt from MAT.
Compliance
Corporate Tax Compliance
Books & Accounts
Maintain proper books and financial statements.
Income Tax Return
Most domestic companies generally use ITR-6.
Advance Tax
Pay advance tax where the applicable threshold is met.
TDS
Deduct and deposit TDS wherever required.
Tax Audit
Obtain a tax audit where applicable.
Transfer Pricing
Follow transfer-pricing rules for applicable transactions.
International Tax
Transfer Pricing
Companies involved in applicable international or specified domestic transactions with associated enterprises may need to follow India's transfer-pricing rules and the arm's-length principle.
Transfer-pricing documentation
Comparable transaction information
Prescribed accountant reports
Risk
Non-Compliance Consequences
Interest on unpaid or delayed taxes
Late filing fees or penalties
Penalties for inaccurate reporting
Consequences for poor record keeping
Transfer-pricing penalties
Prosecution in serious cases
Planning
Corporate Tax Planning
Companies can use legitimate tax planning to structure their affairs within the applicable tax laws.
Choose the Right Regime
Compare normal taxation with concessional provisions.
Manage Deductions
Plan eligible depreciation, expenses and deductions.
Plan Cash Flow
Manage advance tax and other tax payment obligations.
Cross-Border Planning
Review transfer pricing and international tax obligations.
Tax planning should remain within the legal framework. Improper tax avoidance or tax evasion can lead to penalties and other legal consequences.
Checklist
Before Filing Corporate Tax
Confirm the applicable corporate tax rate.
Check eligibility for concessional taxation.
Calculate surcharge and cess.
Review MAT implications.
Check deductions and carried-forward losses.
Complete tax audit requirements where applicable.
Review advance tax obligations.
Check transfer-pricing requirements.
FAQs
Corporate Tax Questions
What is corporate tax?+
Corporate tax is a direct tax charged on the taxable income of companies.
What is the normal corporate tax rate?+
For AY 2026–27, eligible domestic companies may generally be taxed at 25% or 30%, depending on the applicable conditions.
What is Section 115BAA?+
It is a concessional tax regime allowing eligible domestic companies to pay tax at a 22% base rate, subject to conditions.
What is MAT?+
Minimum Alternate Tax is generally calculated at 15% of book profit for AY 2026–27, subject to applicable provisions.
Which ITR is generally used by companies?+
Most domestic companies generally file ITR-6, subject to applicable provisions and exceptions.
Conclusion
Plan Corporate Tax Carefully
Corporate taxation depends on the company's income, tax regime, deductions, business structure and other statutory factors. Companies should maintain proper records, meet filing requirements and compare available tax regimes carefully.
Review the latest Income Tax Department rules before filing or selecting a corporate tax regime.
Disclaimer
Corporate tax rates, deductions, compliance requirements and statutory provisions may change. The applicable tax treatment depends on the company's specific circumstances. For company-specific tax planning and compliance, consult a qualified Chartered Accountant or tax professional.
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