India

A resident company is taxed on its worldwide income. A non-resident company is taxed only on income that is received in India, or that accrues or arises, or is deemed to accrue or arise, in India.

The corporate income tax (CIT) rate applicable to an Indian company and a foreign company for the tax year 2024/25 is as follows:

* Effective tax rates include surcharge and health and education cess. For resident companies, surcharge shall be applicable at the rate of 0%, 7%, or 12%, depending on total income. For non-resident companies, surcharge shall be applicable at the rate of 0%, 2%, or 5%, depending on total income. Further, health and education cess shall be levied at the rate of 4%, irrespective of amount of total income.

Reduced rate of tax for certain existing domestic companies

A beneficial CIT rate of 22% (plus surcharge of 10% and applicable health and education cess of 4%) can be availed with effect from tax year 2019/20. This beneficial rate is at the option of the company and is applicable on satisfaction of the following conditions, cumulatively:

1. The company has not claimed a tax holiday available to a unit in a Special Economic Zone (SEZ), benefit of accelerated depreciation, or benefit of additional depreciation, investment allowances, expenditure on scientific research, and any deduction in respect of certain income other than deduction in respect of employment of new employees and deduction of certain income of Offshore Banking Units and International Financial Service Centre.
2. The company has not claimed set-off of loss and unabsorbed depreciation carried forward from any earlier years including set-off of any unabsorbed depreciation and losses relating to loss/depreciation on amalgamation, provided such loss is attributable to the deductions referred to in (i) above. However, the corresponding adjustment in written down value of such block of asset as on 1 April 2019 will be allowed in the prescribed manner.
3. The option of seeking the benefit of a reduced CIT rate of 22% is furnished in the prescribed manner before the due date of furnishing of income.
4. Companies exercising this option have been excluded from the applicability of provisions of minimum alternate tax (MAT) and MAT credit.

Benefit of the above provision of reduced tax rate will not be available in the year of non-compliance and all the subsequent years and other provisions of the Income-tax Act will apply as if the option has not been exercised from the year of non-compliance.

Reduced rate of tax for newly set-up domestic manufacturing companies and companies engaged in generation of electricity

A beneficial CIT rate of 15% (plus surcharge of 10% and applicable health and education cess of 4%) with effect from tax year 2019/20 for newly set-up domestic manufacturing companies can be availed. The benefit of concessional tax rate of 15% has been extended to domestic companies engaged in the business of generation of electricity from tax year 2020/21.

The beneficial rate of 15% (plus surcharge of 10% and applicable health and education cess) can be exercised at the option of the company and is applicable on satisfaction of the following conditions, cumulatively:

1. The company is incorporated on or after 1 October 2019 and commences manufacture or production of any article or thing on or before 31 March 2024.
2. The 'business' is not formed by splitting up or reconstruction of business already in existence (exception provided for undertaking formed as a result of re-establishment, reconstruction, or revival of business).
3. Does not use plant and machinery previously used for any purpose in India, and no depreciation has been claimed on the same.
4. Does not use any building previously used as a hotel or convention centre for which deductions under provisions of the Income-tax Act have been claimed or allowed.
5. The company is not engaged in any business other than the business of manufacture or production of any article or thing and research or distribution of such article or thing manufactured or produced. The following businesses will not be treated as business of manufacture or production of any article or thing:
   • Development of computer software in any form or in any media.
   • Conversion of marble blocks or similar items into slabs.
   • Bottling of gas into cylinder.
   • Printing of books or production of cinematograph films.
   • Any other business notified in this behalf.
6. The company has not claimed a benefit for establishing its unit in an SEZ, benefit of accelerated depreciation, or benefit of additional depreciation, investment allowances, expenditure on scientific research, and any deduction in respect of certain income other than deduction in respect of employment of new employees.
7. The company has not claimed set-off of loss and unabsorbed depreciation carried forward from any earlier years, including set-off of any unabsorbed depreciation and losses relating to loss/depreciation on amalgamation, provided such loss is attributable to the deductions referred to in (vi) above.
8. In case difficulty arises in non-fulfilment of certain conditions in this section, the Indian Revenue Department may issue guidelines for removing the difficulty.
9. The option of seeking the benefit of a reduced CIT rate of 15% is furnished in the prescribed manner before the due date of furnishing of income.
10. Domestic transfer pricing provision will be applicable for these companies.
11. Companies exercising this option have been excluded from the applicability of provisions of MAT and MAT credit.

Benefit of the above provision of reduced tax rate will not be available in the year of non-compliance and all the subsequent years and other provisions of the Income-tax Act will apply as if the option has not been exercised from the year of non-compliance. However, such company may exercise an option to be governed under provisions of reduced tax rate of 22% (plus surcharge of 10% and applicable health and education cess).

Minimum alternative tax (MAT)

Companies exercising the option of a lower tax rate of 22% (discussed above) have been excluded from the applicability of provisions of MAT and MAT credit.

Companies that continue to pay taxes under the existing tax regime (not exercising the option under the alternative tax regime as discussed above) are liable to pay MAT on their adjusted book profits (other than income from life insurance business) where the tax liability under the normal provisions (excluding surcharge and health and education cess) of the Income-tax Act for the tax year is not more than 15% (excluding surcharge and health and education cess) of such book profits.

MAT credit is the amount paid over and above the normal tax liability, which can be carried forward and can be utilised for 15 years. However, MAT credit to the extent of difference between the foreign tax credits allowed against MAT over such credit allowable against the tax under the other provisions of the Income-tax Act will not be eligible to be carried forward.

MAT provisions are not applicable to foreign companies that do not have a PE in India. However, MAT provisions will not apply to foreign companies where their total income is solely derived from shipping business, exploration of mineral oils, business of aircraft, civil construction in turnkey projects and income thereon is offered to tax as per specific provisions provided under the Income-tax Act.

The existing tax rates under MAT are provided in the below table:

* Basic rate of MAT is 9% of book profits in case of a corporate and non-corporate taxpayer located in an International Financial Services Centre and deriving income solely in convertible foreign exchange.

** Effective tax rates include surcharge and health and education cess. For resident companies, surcharge shall be applicable at the rate of 0%, 7%, or12%, depending on total income. For non-resident companies, surcharge shall be applicable at the rate of 0%, 2%, or 5%, depending on total income. Further, health and education cess shall be levied at the rate of 4%, irrespective of amount of total income.

Local income taxes

There are no local, state, or provincial taxes on income in India at present.