Corporate tax is a type of direct tax imposed on the net income of the company or its is a form of tax levied on profits earned by the businessmen in a particular time period.Corporate tax is also called corporation tax or company tax. Both private and public companies which are registered in India under the Companies Act 1956, are liable to pay corporation tax.
Countries levy corporate taxes in order to smooth out the tax process for their enterprises. Different rules have applied in different countries for taxing of income. Corporate tax is a precious part of any tax regime, particularly for developing countries where alternative sources of revenue are low. Corporate taxes are very progressive for the countries and raise significant amount of money for public services.
Corporate Tax in India
Domestic companies as well as foreign companies both are liable to pay corporate tax under the Income tax Act in India. A Domestic company is taxed on its universal income and a foreign company is only taxed on the income which is earned within India (being accrued or received in India).
For the calculation of taxes under the Income tax act, we will have to know types of companies which are defined below:
Domestic Company– Domestic Company means a company which is registered under the Companies Act of India and it also includes the company which is registered in the foreign country having control and management fully situated in India. Both private as well as public company included in domestic companies.
Foreign Company – Foreign Company is a company which is not registered under the companies Act of India .It has control and management outside India.
Income of a Company
Before the calculation of corporate tax on the income of a company, we will have to know about all the factors that make up the total income of any company. These income factors are given below:-
- Profits from Business
- Income from Property
- Capital Gains
- Income from other sources such as foreign dividends, interest etc.
Tax rebates applicable on Corporate Tax
There are many provisions of tax rebates available to companies on corporate tax.. These rebates are as follows:-
- Domestic Companies can deduct the dividend received from other domestic companies, in certain cases.
- Deductions are allowed for exports and new undertakings, in some cases.
- Some special provisions are applicable to venture fund and venture capital enterprises
- According to a provision business losses being carried over for a maximum period of 8 years.
- Power sources set up and new infrastructure is also subject to certain deductions.
- Capital gains, interest and dividends can also be deducted in some cases.
Corporate Tax Rate in India
A corporate tax rate in India varies from one type of company to another it means domestic companies and foreign companies pay tax at different rates. The corporate tax rate also differs based on a slab rate system, if depending on the type of corporate entity and the different revenues earned by each of them.
Corporation Tax rates in India for the Assessment year 2019-2020
Type of Company
Surcharge on Net Income Less than Rs.1 crore
Surcharge on Net Income greater than Rs.1 crore and less than Rs.10 crore
Surcharge on Net Income greater than Rs.10 crore
Domestic with annual turnover up to Rs. 250 crore
Domestic Company with turnover more than Rs. 250 crore