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India Corporate - Taxes on corporate income

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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 2018/19 is as follows:

Income * Rate of CIT (%)
Turnover not greater than INR 2.5 billion in tax year 2016/17 Other domestic companies Foreign companies
Basic Effective** Basic Effective** Basic Effective **
Less than 10 million Indian rupees (INR) 25 26.00 30 31.20 40 41.60
More than INR 10 million but less than INR 100 million 25 27.82 30 33.38 40 42.43
More than INR 100 million 25 29.12 30 34.94 40 43.68

* Surcharge is payable only where total taxable income exceeds INR 10 million.

** Effective tax rates include surcharge and health and education cess.

Minimum alternative tax (MAT)

Companies 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, 1961 (‘the Act’) for the tax year is not more than 18.5% (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 Act shall not be eligible to be carried forward.

Further, due to implementation of Indian Accounting Standards (Ind AS) by the government, which are converged with the International Financial Reporting Standards (IFRS), the government amended the MAT provisions of the Act, so as to provide the framework for the computation of book profit for the purpose of levying MAT in the case of companies required to comply with Ind AS in the year of adoption and thereafter. This framework was specified on the basis of the recommendations of the MAT Ind AS Committee constituted for this purpose.

MAT provisions are not applicable to foreign companies that do not have a permanent establishment (PE) in India. However, the Finance Act, 2018 has provided that MAT provisions shall not apply to foreign companies where their total income is solely derived from shipping business, exploration of mineral oils, business of aircraft, or civil construction in turnkey projects, and income thereon is offered to tax as per specific provisions provided under the Act.

Capital gains from transfer of securities, interest, royalties, and fees for technical services accruing or arising to a foreign company (which has a PE in India) have been excluded from chargeability of MAT if tax payable on such income is less than 18.5% (exclusive of surcharge, education cess, etc.). Further, expenditure, if any, debited to the profit and loss account corresponding to such income shall be added back to the book profit for the purpose of computation of MAT.

Income * Rate of MAT (%)
Indian company Foreign company (other than exempted)
Basic ** Including surcharge and health and education cess (effective tax rate) Basic Including surcharge and health and education cess (effective tax rate)
Less than INR 10 million 18.5 19.240 18.5 19.240
More than INR 10 million but less than INR 100 million 18.5 20.586 18.5 19.240
More than INR 100 million 18.5 21.548 18.5 20.202

* Surcharge is payable only where total taxable income exceeds INR 10 million.

** Basic rate of MAT is 9% in case of a company located in an International Financial Services Centre and deriving income solely in convertible foreign exchange.

Sick companies (i.e. companies whose losses have wiped out their net worth and that are doubtful of being revived and nursed back to profitability) are not subject to MAT.

A Special Economic Zone (SEZ) developer and a unit in an SEZ are also liable to pay MAT.

Tonnage tax scheme

The tonnage tax scheme, a presumptive tax provision, can be chosen by a non-resident company that has a place of effective management (PoEM) in India, owns at least one qualifying ship, and whose main objective is to carry on the business of operating 'qualifying ships'. The tonnage tax scheme is in place of CIT and is levied on the basis of tonnage of vessels owned, operated, or chartered by it instead of on net income generated by commercial operations. Under a presumptive tax system, taxpayers can opt to be taxed at a pre-designated tax rate on its revenues.

Under this scheme, deemed income shall be assessed at 7.5% of the amount paid or payable (whether in or out of India) for carriage of passengers, livestock, mail, or goods shipped from any port in India, and the amount received or deemed to be received in India on account of carriage of passengers, livestock, mail, or goods shipped to any port outside India shall be treated as profits and gains of business.

Treaty rates will apply to non-resident shipping companies if they are lower than the rates under the tonnage tax scheme.

A government company, or a public company formed and registered in India with the main object of operating ships, is eligible for a deduction not exceeding the lower of 50% of its profits and the sum transferred to a special reserve to be utilised in accordance with the provisions of the Act.

Local income taxes

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

Last Reviewed - 02 July 2018

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