What is Corporate Tax in India
Corporate tax in India is a direct tax charged on a company's taxable income for a tax year. The calculation follows the governing income-tax law and accounts for permitted deductions, disallowances, loss set-offs, and any special-rate provisions. Surcharge may apply at prescribed income levels, after which a 4% Health and Education Cess is added to the tax and surcharge.
What is Meant as Income of a Company
Company income can arise from trading or services, property rent, capital gains, interest, dividends, royalties, technical fees, and other receipts. These streams are computed under separate heads before they are brought together. The profit in the financial statements supplies the starting figure, but tax depreciation, disallowed costs, exempt receipts, and eligible loss set-offs alter the final amount. An Indian company generally reports income from domestic and overseas operations, with foreign-tax relief where the statutory conditions are met. A foreign company is taxed on receipts arising in the country or connected with a permanent establishment, business link, asset, or specified transaction. This conversion of accounting results into taxable income is the working core of corporate taxation.
Tax Rates Applicable
The rates below apply to Assessment Year 2026-27, covering income earned during Financial Year 2025-26 under the Income-tax Act, 1961.
Domestic Companies Under the Normal Provisions
For Tax Year 2026-27, the base rate is 25% when a domestic company's turnover or gross receipts did not exceed ₹400 crore in Tax Year 2024-25. The rate rises to 30% when that condition is not met. The annual Finance Act fixes the reference year, which prevents the company tax rate from being determined through current-year revenue alone. Deductions and incentives available under the normal provisions can be claimed after their individual conditions are satisfied.
The 25% Manufacturing Option
A separate 25% route under section 199 of the Income-tax Act, 2025 is available to qualifying domestic manufacturers. The company must have been set up and registered on or after 1 March 2016 and must conduct the permitted manufacturing or production business. Specified deductions, investment allowances, and related loss components are surrendered. The option must be exercised through the prescribed filing process. Companies already using the corresponding section 115BA regime can continue under the transition rules.
The 22% Concessional Regime
An eligible domestic company may elect the 22% rate under section 200. The election requires it to give up listed exemptions and deductions, together with losses or unabsorbed depreciation linked to those claims. A flat 10% surcharge applies at every income level, followed by the 4% cess, which produces an effective rate of 25.168%. Minimum Alternate Tax does not apply after a valid election. Before choosing this route, the tax team should compare the rate saving with the value of incentives being surrendered.
The 15% Regime for Eligible Manufacturers
The 15% route under section 201 has a narrower entry test. It covers a qualifying new domestic manufacturer set up and registered on or after 1 October 2019 that began manufacturing by 31 March 2024. Eligible manufacturing income bears 15%, while certain non-manufacturing income and specified short-term capital gains are charged at 22%. Specified deemed income can attract 30%. The regime carries a flat 10% surcharge and 4% cess, giving an effective rate of 17.16% on eligible manufacturing income. Minimum Alternate Tax does not apply. Restrictions address business reconstruction and previously used machinery.
Foreign Companies
Foreign companies face a 35% base rate for Tax Year 2026-27 on income chargeable under domestic law, subject to relief under an applicable tax treaty. Branch profits, royalties, technical-service fees, interest, and capital gains can follow separate provisions or treaty rates. Surcharge is 2% when total income exceeds ₹1 crore and remains within ₹10 crore, rising to 5% above ₹10 crore. The 4% cess is added afterward.
Surcharge, Cess, and Minimum Alternate Tax
For a domestic company under the normal or 25% manufacturing provisions, surcharge is 7% when total income exceeds ₹1 crore but remains within ₹10 crore. It increases to 12% above ₹10 crore. Marginal relief controls the sudden rise in liability when income crosses either threshold. Health and Education Cess is charged at 4% of tax plus surcharge. Minimum Alternate Tax is generally 15% of book profit when the regular liability falls below that amount. A qualifying International Financial Services Centre unit can face a 9% MAT rate.
How to File Corporate Tax Return
- Establish which year and tax regime govern the filing. Assessment Year 2026-27 deals with income earned during Financial Year 2025-26, so the return remains governed by the Income-tax Act, 1961. The Income-tax Act, 2025 applies to income arising from 1 April 2026. Before any schedules are prepared, the company also needs to confirm whether its liability will be calculated under the normal provisions or under a valid concessional regime election.
- Bring the books to a clean close. Start with the audited financial statements, trial balance, fixed-asset register and tax ledgers. Then trace the revenue and expense figures across bank records, GSTR returns, Form 26AS, the Annual Information Statement and TDS certificates. Differences are far easier to locate when the underlying double-entry accounting system has been maintained properly.
- Convert the accounting profit into taxable income. Book profit cannot simply be carried into the return. The computation may need separate treatment for depreciation, disallowed expenses, exempt income, brought-forward losses, capital gains and receipts taxed at special rates. The company should also calculate its effective tax rate, since the published base percentage leaves out surcharge, cess, incentives and permanent tax differences.
- Identify the audit filings triggered by the company’s transactions. A tax audit is reported through Forms 3CA-3CD. Form 3CEB applies where specified international or domestic transactions are involved, while Form 29B supports Minimum Alternate Tax reporting. Whichever reports apply must reach the portal within the prescribed period for that assessment year.
- Settle the tax account before the return is submitted. Portal records should be checked against advance tax, TDS, TCS, foreign-tax credit and any claims carried from earlier filings. Where the credits do not cover the final liability, the balance may be deposited as self-assessment tax through the e-Pay Tax service. The timing needs attention alongside working capital, because a late payment can attract interest even when the return itself has been computed correctly.
- Select the return form and fill only the schedules that apply. ITR-6 is used by companies other than those claiming exemption under section 11. An exempt entity that meets the relevant conditions files ITR-7 instead. The chosen utility or compatible filing software must carry the financial statements, tax computation, ownership particulars, foreign-asset information, related-party disclosures and audit details.
- Submit the return with a working DSC. The principal contact’s digital signature certificate has to be valid and registered on the income-tax portal before upload. For Assessment Year 2026-27, the ordinary due date shown for ITR-6 is 31 October 2026. A company required to furnish a transfer-pricing report has until 30 November 2026, unless the authorities announce an extension.
- Keep the filing record and check the processing outcome. Retain the filed income tax return, computation, tax challans, audit reports, DSC confirmation and electronic acknowledgement together. When the processing intimation is issued, compare it line by line with the submitted figures. A mistake made in the return may require a revised filing; an error arising during processing may instead call for a rectification request.
