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    Published Mon, 07 Nov 2022 | Updated Mon, 07 Nov 2022

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    A.   Tax rates for domestic companies

    Domestic Company means an Indian Company or any other Company which in respect of its income liable to pay tax in India and has made the prescribed adjustments for the declaration and payment of dividend within India.              

    The corporate tax rate for domestic companies are as below:    

     

    Income

    Domestic Company with turnover less than 400Cr in one year prior to preceding previous year *

    Domestic Company with turnover of 400Cr or more during in one year prior to preceding previous year *

    Total Income less than 1 Crore in current year 

    25% plus cess 4% 

    30% plus cess 4% 

    Total income more than 1 Crore but less than 10 Crore in current year 

    25% plus surcharge of 7% plus cess 4% 

    30% plus surcharge of 7% plus cess 4% 

    Total income more than 10 Crore in current year 

    25% plus surcharge of 12% plus cess 4% 

    30% plus surcharge of 12% plus cess 4% 

    *e.g. for assessment year 2022-23, the turnover has to be considered for previous year 2019-20 and so on..

     

    Further domestic companies have following options for concessional tax rates subject to satisfaction of prescribed conditions:

    Type of company 

    Tax Rate

    All domestic companies u/s 115BAA without availing prescribed deduction/exemption (applicable from FY 2019-20)

    22 % plus surcharge of 10 % and cess of 4 %, thus effective tax rate of 25.17 % irrespective of amount of income

    Manufacturing companies incorporated on or after 1st October 2019 u/s 115BAB (without availment of prescribed deductions/exemption)

    15 % plus surcharge of 10 % and cess of 4 %, thus effective tax rate of 17.16 % irrespective of amount of income

     

    A.1     Conditions prescribed under Section 115BAA:

    All domestic companies shall have an option to pay income tax at the rate of 22% (plus applicable surcharge and cess), provided such companies should not avail certain exemptions/incentives under different provisions of income tax as described in para A.3 below. 

    Provisions of MAT is not applicable for companies opting for section 115BAA. Please note that MAT rate has been reduced from 18.5 % to 15 % with effect from FY 2019-20.

    Further, such companies will have to exercise this option to be taxed under the section 115BAA on or before the due date of filing income tax returns i.e (31st October/30th November) of the following year. Once the company opts for section 115BAA in a particular financial year, it cannot be withdrawn subsequently.

    A.2     Conditions prescribed under Section 115BAB:

    1.    The company has been set up and registered on or after 1 October 2019 and has commenced manufacturing on or before 31 March 2023. Such a company should:

    • Not be formed by the splitting up and reconstruction of a business already in existence except in case of a business re-established under section 33B

    • Does not use any plant or machinery previously used for any purpose. However, the company can use plant and machinery used outside India and used in India for the first time. Also, the company can use old plant and machinery, the value of which does not exceed 20% of the total value of the plant and machinery used by the company.

    • Does not use a building previously used as a hotel or a convention centre. ‘Hotel’ means a hotel of two-star, three-star or four-star or above category as classified by the Central Government. ‘Convention centre’ means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed.     

    2.   The company is not engaged in any other business other than: –

    • Manufacture of an article or thing.

    • Research in relation to such manufacture or production

    • Distribution of such article or thing manufactured or produced by it

    • Generation of Electricity & Power Distribution

    3. The company is not engaged in the following businesses: –

    • Software Development

    • Mining

    • Conversion of marble blocks or similar materials into slabs

    • Bottling of gas into cylinders

    • Printing of books

    • Production of cinematograph films

    • Any other notified business 

    4. The company informs the Income Tax Department for exercising such an option to claim lower tax rate in the prescribed form on or before the due date of filing income tax return for the company for the first Assessment Year. The option once exercised cannot be withdrawn later. 

    A.3     Conditions for non-availment of exemptions/ incentives/deductions by companies opting for reduced tax rates u/s 115BAA & 115BAB:

    Sections

    Exemption/ Incentive/Deductions not available 

    Section 10AA

    Deduction available for units established in special economic zones

    Section 32 (1) (iia) & 32 AD

    Additional depreciation under section 32 (1) (iia) and investment allowance under section 32AD towards new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal

    Section 33AB

    Deduction for tea, coffee and rubber manufacturing companies

    Section 33ABA

    Deduction towards deposits made towards site restoration fund under section 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India.

    Section 35

    Deduction for expenditure made for scientific research

    Section 35AD

    Deduction for the capital expenditure incurred by any specified business

    Section 35CCC & 35 CCD

    Deduction for the expenditure incurred on an agriculture extension project under section 35CCC or on skill development project under section 35CCD

    Chapter VI-A

    Deduction under chapter VI-A section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction under section 80JJAA and 80M*

    Setoff & Carried Forward

    Set-off of any loss carried forward or unabsorbed depreciation from earlier years, if such losses/unabsorbed depreciation  were attributable to aforementioned deductions

     

    *Section 80M: Where the gross total income of a domestic company in any previous year includes any income by way of dividends 

    • From any other domestic company or

    • Any foreign company or

    • Any business trust

    In such case, the Company would be allowed a deduction of an amount of dividend received from domestic Company, any foreign Company or any business trust upto a limit of dividend distributed by the Company by one month prior to the date of filing of income tax return. Such deduction cannot be carried forward in next FY.

    B. Tax rates for Foreign companies

    As per income tax law, Foreign Company is a company which is not a domestic company as defined i.e. The Company which is registered outside India. A foreign Company can become a domestic company if it makes arrangement for declaration & payment of dividend in India. Following are the applicable tax rates for foreign Companies.

    Type of Income

    Income upto Rs. 1 Crore

    Income of more than Rs 1 Crore and upto Rs 10 crore

    Income of more than Rs 10 Crore

    Royalty received from Government or an Indian concern or fees for rendering technical services where such agreement has, in either case, been approved by the Central Government after the date of March 31, 1961 but before April1,1976.

    50% plus cess of 4%

    50% plus surcharge of 2% plus cess of 4%

    50% plus surcharge of 5% plus cess of 4%

    Dividend and Interest income from Government or an Indian concern other than as referred above  

    20% plus cess of 4%

    20% plus surcharge of 2% plus cess of 4%

    20% plus surcharge of 5% plus cess of 4%

    Interest income on infrastructure debt fund or bonds

    5% plus cess of 4%

    5% plus surcharge of 2% plus cess of 4%

    5% plus surcharge of 5% plus cess of 4%

    Royalty or fees for rendering technical or professional services received from Government or an Indian concern where such agreement has, in either case, been approved by the Central Government after the date of April 1, 1976 (other than as prescribed u/s 44DA of the Act)

    10% plus cess of 4%

    10% plus surcharge of 2% plus cess of 4%

    10% plus surcharge of 5% plus cess of 4%

    Any other income

    40% plus cess of 4%

    40% plus surcharge of 2% plus cess of 4%

    40% plus surcharge of 5% plus cess of 4%

    *As per section 44DA of the Act, The income by way of royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after the 31st day of March, 2003, where such non-resident (not being a company) or a foreign company carries on business in India through a permanent establishment situated therein, or performs professional services from a fixed place of profession situated therein, and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of profession, as the case may be, such income shall be chargeable @ 40%.

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