Corporate Tax Rate In India: Slabs, Surcharge and Applicability

Understanding the Corporate tax rate in India is essential for every business operating in the country. Whether you are a domestic company, a newly incorporated manufacturing entity, or a foreign enterprise with operations in India, knowing the applicable rates, surcharges, and compliance requirements helps in effective financial planning and regulatory adherence.

Corporate taxation in India is governed by the Income Tax Act, 1961. The law lays down different tax rates depending on the nature of the company, its turnover, total income, and the tax regime it opts for. This article presents a comprehensive overview of the corporate income tax rate in India, including slabs, surcharge, cess, and special provisions.

Corporate Tax Structure In India

The corporate tax structure in India is divided primarily into:

• Domestic companies
• Foreign companies
• Companies opting for concessional tax regimes
• Special provisions such as Minimum Alternate Tax (MAT)

A resident company is taxed on its global income. In contrast, a non-resident company is taxed only on income that is received in India or accrues or arises (or is deemed to accrue or arise) in India.

Income tax for companies in India varies based on turnover, total income, and whether the company opts for special tax regimes under Sections 115BA, 115BAA, or 115BAB.

Tax Rate For Domestic Companies In India (AY 2026–27)

Normal Rates

The tax rate for domestic companies in India depends largely on turnover in the previous financial year and total income.

Companies with Turnover up to ₹400 Crore

• Total Income ≤ ₹1 Crore
  • Tax: 25%
  • Surcharge: Nil
  • Cess: 4%
  • Effective tax rate: 26.00%
• Total Income between ₹1 Crore and ₹10 Crore
  • Tax: 25%
  • Surcharge: 7%
  • Cess: 4%
  • Effective tax rate: 27.82%
• Total Income above ₹10 Crore
  • Tax: 25%
  • Surcharge: 12%
  • Cess: 4%
  • Effective tax rate: 29.12%

Companies with Turnover above ₹400 Crore

• Total Income ≤ ₹1 Crore
  • Tax: 30%
  • Surcharge: Nil
  • Cess: 4%
  • Effective tax rate: 31.20%
• Total Income between ₹1 Crore and ₹10 Crore
  • Tax: 30%
  • Surcharge: 7%
  • Cess: 4%
  • Effective tax rate: 33.38%
• Total Income above ₹10 Crore
  • Tax: 30%
  • Surcharge: 12%
  • Cess: 4%
  • Effective tax rate: 34.94%

These Corporate tax slabs in India demonstrate how surcharge increases with income, impacting the overall Effective corporate tax rate.

Surcharge and Cess on Corporate Tax

A surcharge is an additional tax levied on income tax. For domestic companies, surcharge rates are:

• 0% where total income does not exceed ₹1 crore
• 7% where total income exceeds ₹1 crore but does not exceed ₹10 crore
• 12% where total income exceeds ₹10 crore

For foreign companies, the surcharge is:

• 0% up to ₹1 crore
• 2% between ₹1 crore and ₹10 crore
• 5% above ₹10 crore

Additionally, a 4% Health and Education Cess is levied on the total of tax plus surcharge in all cases.

The corporate tax rate and surcharge together determine the final tax liability.

Current MAT Rate In India

The current mat rate in India is 15% of book profit for domestic companies.

Minimum Alternate Tax (MAT) ensures that companies with significant book profits but low taxable income due to exemptions or deductions still pay a minimum level of tax. A domestic company must pay tax based on:

• Normal provisions of the Income Tax Act, or
• 15% of book profits (plus applicable surcharge and cess),

whichever is higher.

MAT provisions generally do not apply to companies opting for Section 115BAA or 115BAB.

New Tax Regime For Companies

The government introduced a New tax regime for companies to encourage manufacturing and simplify compliance.

Section 115BA – 25% Rate

Applicable to certain manufacturing companies incorporated after October 1, 2016.

• Tax rate: 25%
• Surcharge: Nil
• Cess: 4%
• Effective rate: 26.00%

MAT provisions apply.

Section 115BAA – 22% Rate

Available to any domestic company, subject to conditions that it does not claim specified exemptions or deductions.

• Tax rate: 22%
• Surcharge: 10%
• Cess: 4%
• Effective tax rate: 25.17%

MAT does not apply under this section.

Section 115BAB – 15% Rate

Applicable to new manufacturing companies incorporated after October 1, 2019.

• Tax rate: 15%
• Surcharge: 10%
• Cess: 4%
• Effective tax rate: 17.16%

This is the lowest Effective corporate tax rate available to eligible domestic manufacturing entities.

Foreign Company Tax Rate In India (AY 2026–27)

The foreign company tax rate in India is generally higher than that for domestic companies.

Normal Tax Rates

• Total Income ≤ ₹1 Crore
  • Tax: 35%
  • Surcharge: Nil
  • Cess: 4%
  • Effective rate: 36.40%
• Total Income between ₹1 Crore and ₹10 Crore
  • Tax: 35%
  • Surcharge: 2%
  • Cess: 4%
  • Effective rate: 37.13%
• Total Income above ₹10 Crore
  • Tax: 35%
  • Surcharge: 5%
  • Cess: 4%
  • Effective rate: 38.22%

MAT provisions are also applicable to foreign companies, subject to treaty relief and specific exclusions.

Taxation Of Foreign Companies In India

Taxation of foreign companies in India depends on whether the company has a Permanent Establishment (PE) in India and the nature of income earned.

Foreign companies are taxed on:

• Income received or deemed to be received in India
• Income accruing or arising in India
• Income deemed to accrue or arise in India

Special Rate: 50%

A tax rate of 50% applies to certain royalty and technical service fees received under specific agreements entered into before April 1, 1976, and approved by the Central Government.

Double Taxation Avoidance Agreements (DTAAs) may provide relief, depending on treaty provisions.

Surcharge For Individuals/HUF/AOP On Divided and Capital Gains (AY 2025–26 and 2026–27)

Though corporate tax applies to companies, surcharge rules also affect shareholders. For individuals, HUFs, AOPs, BOIs, or Artificial Juridical Persons:

• No surcharge where the total income does not exceed ₹50 lakh
• 10% where income exceeds ₹50 lakh but does not exceed ₹1 crore
• 15% where income exceeds ₹1 crore but does not exceed ₹2 crore
• 25% or 37% in specific higher-income situations
• However, surcharge on dividend income and capital gains under Sections 111A, 112, and 112A is capped at 15%

This ensures that excessive surcharge does not apply to such investment income.

| Know more about HUFs with TMWala

Effective Corporate Tax Rate

The Effective corporate tax rate includes:

• Base income tax
• Applicable surcharge
• 4% health and education cess

Therefore, while the headline rate may seem straightforward, the final liability depends on income level and the selected regime.

Companies Act Compliance and Corporate Tax

Corporate taxation cannot be viewed in isolation from Companies Act compliance. Companies must:

• Maintain proper books of account
• Prepare audited financial statements
• File annual returns
• Conduct statutory audits
• Comply with reporting standards

Accurate financial reporting ensures the correct computation of taxable income and reduces litigation risk.

Non-compliance can lead to penalties under both tax law and company law.

Corporate Tax Laws: Planning and Compliance

The legal requirements of corporate taxation need to be fulfilled, yet businesses should use effective planning to minimize their tax expenses. Here are the best practices:

Appoint a Tax Expert or Consultant
A tax consultant enables businesses to grasp intricate corporate tax requirements in India and guides them for tax audits and assessments.

Use Accounting Software
Automated systems assist companies in transaction monitoring, generate reports, and ensure timely business tax regulation filings.

Regular Compliance Calendar
A digital calendar system with reminders helps track return filings, advance tax payments, and TDS deadlines.

Conduct Internal Audits
Periodic internal auditsquarterly or bi-annuallyhelp detect discrepancies early and strengthen tax governance.

Stay Updated with Amendments
Corporate tax laws change frequently through Finance Acts and budget announcements. Businesses should train finance teams to adapt to new amendments promptly.

Conclusion

The Corporate tax rate in India is structured to accommodate different types of companies, turnover levels, and policy objectives. From standard rates of 25% and 30% for domestic companies to concessional regimes of 22% and 15%, and a 35% base rate for foreign entities, the system offers multiple pathways.

However, the final tax burden depends on surcharge, cess, MAT applicability, and regime selection. A clear understanding of the corporate income tax rate in India, Corporate tax slabs in India, foreign company tax rate in India, current MAT rate in India, and overall corporate tax structure in India is essential for sound financial planning.

Strategic compliance, professional guidance, and proactive tax management ensure that businesses not only meet regulatory obligations but also optimize their tax position responsibly and efficiently.

FAQs

1. What is the corporate tax rate in India?
   25% or 30% for domestic companies, plus surcharge and cess.
2. How are corporate tax slabs determined?
   Based on total income and turnover.
3. What is the surcharge for domestic companies?
   0%, 7%, or 12% depending on income.
4. What is the effective corporate tax rate?
   Ranges from 26% to 34.94% after surcharge and cess.
5. What are Sections 115BAA and 115BAB?
   Special tax regimes for new manufacturing companies at 22% and 15% base rates.
6. What is the foreign company tax rate in India?
   Base rate 35%, plus surcharge and 4% cess.
7. Is MAT applicable to companies?
   Yes, if normal tax <15% of book profit.
8. How is the surcharge applied to foreign companies?
   0% for ≤ ₹1 crore, 2% for ₹1–10 crore, 5% for > ₹10 crore.
9. What is the Health & Education Cess?
   4% on tax plus surcharge.
10. How can companies comply with corporate tax laws?
    Maintain books, file returns, conduct audits, and stay updated.