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“Corporate taxes are not just a revenue source; they are a means to ensure that businesses contribute to the social and economic systems that support their success.” — Paul Krugman
Corporate income tax is charged on the profits earned by both listed and unlisted companies. In contrast to personal income tax, which is applicable to individuals, corporate income tax is a direct tax placed on a company’s earnings. This differs from indirect taxes, which are applied to goods and services sold by the company and collected from customers for remittance to the government. Companies are obligated to disclose their taxable income and provide a comprehensive tax summary through the appropriate Income Tax Return (ITR) form.
Corporate Income Tax Return (ITR)
An income tax return (ITR) is an annual formal document filed with the tax authorities. It details a corporate entity’s income, expenses, and other relevant financial information for a specific assessment year. Filing this document is crucial for accurately reporting financial activities, determining tax liabilities, and ensuring compliance with tax regulations.
Key Information (Related to the Previous Year Starting from 01 April to 31 March) to be included in the Corporate Income-Tax Return:
- Company’s financial statement for the previous year.
- Company’s gross income from all sources.
- Deductible expenses incurred during the previous year.
- Any tax credits or exemptions claimed.
- Net taxable income.
- Tax liability or refund as applicable
Filing accurate and timely ITRs is crucial to comply with tax regulations and avoid penalties.
Due Dates
The due date for filing ITRs varies based on the type of company/body as per the Income Tax Act, 1961:
- All the companies that have an audit requirement under the Companies Act 2013 are required to file their corporate income tax return on or before 31 October of the following year.
- For all companies having international or specified domestic transactions with associated enterprises, the corporate income tax return needs to be filed on or before 30 November of the following year.
- It’s essential to meet the deadlines to avoid losing some rights to claim certain deductions and financial penalties.
Applicability
All companies and corporate entities registered in India are required to file income tax returns irrespective of whether they have made profits or incurred losses during the financial year.
Tax Rates
The corporate tax rate in India varies depending on the type of company and its net income. Here’s a breakdown:
| Income Range | Basic Tax Rate | Surcharge* | Cess |
|---|---|---|---|
| A domestic manufacturing company incorporated before 1 October 2019, which opted for Section 115BAB | 15% | 10% | 4% |
| A domestic company which opted for Section 115BA | 25% | 7% / 12% | 4% |
| A domestic company that opted for Section 115BAA | 22% | 10% | 4% |
| If turnover does not exceed INR 400 crore | 25% | 7% / 12% | 4% |
| For other domestic companies | 30% | 7% / 12% | 4% |
* Surcharge of 7% if total taxable income exceeds INR 1 Crore up to 10 Crore; in case the income exceeds INR 10 crore, it will be @ 12%
| Income Range | Basic Tax Rate | Surcharge* | Cess |
|---|---|---|---|
| Royalty from the Government or an Indian concern in pursuance of an agreement made with the Indian concern after 31st March 1961, but before 1st April 1976, or fees for rendering technical services in pursuance of an agreement made after 29th February 1964 but before 1st April 1976 and where such agreement has, in either case, been approved by the Central Government | 50% | 2% / 5% | 4% |
| For other income | 40% | 2% / 5% | 4% |
* Surcharge of 2% if total taxable income exceeds INR 1 Crore up to 10 Crore; in case the income exceeds INR 10 Crore, it will be @ 5%.
| Basic Tax Rate | Surcharge* | Cess |
|---|---|---|
| 30% | 12% | 4% |
*Surcharge of 12% if total income exceeds INR 1 Crore.
Tax Exemption
Certain categories of income or specific types of entities may qualify for tax exemptions under various provisions of the Income Tax Act, such as exemptions on dividends, capital gains, etc.
At Mercurius, our expert team can guide you through the eligibility criteria and maximize your tax benefits by securing the appropriate exemptions under the Income Tax Act.
Tax Litigations: Assessments and Collections
Companies have the right to appeal and resolve tax disputes related to assessments through legal channels and tax tribunals.
Litigations Related to Income-Tax Assessments
When a corporation files its income tax return, the Income Tax authorities review it thoroughly. If there are disagreements regarding the inclusion/exclusion of specific income sources, claimed deductions, or asset valuations affecting capital gains tax, a notice of hearing is issued, allowing the corporation to present its case.
In case of the defaults on the part of the Corporation in addition to the assessment proceedings are as follows,
- Incorrect deduction claims.
- Underreporting of income,
- Late filing, or
- Missed/delayed payments.
Any of the errors mentioned above in the tax return may lead to penalty assessment proceedings.
When a corporation files its income tax return, the Income Tax authorities conduct a thorough review. Disagreements may arise regarding the inclusion/exclusion of specific income sources, claimed deductions, or asset valuations affecting capital gains tax. In such cases, a notice of hearing is issued, allowing the corporation to present its case.
Corporation defaults, such as incorrect deduction claims, underreporting of income, late filing, or missed/delayed payments, can lead to penalty assessment proceedings.
Once the tax authorities pass the assessment order, they may enforce tax recovery by seizing assets, freezing bank accounts, or directing debtors to pay the tax authorities directly.
Litigations Related to Tax Deposits and Demand Collection
Many times, claims for tax refunds made in income tax returns are refused, or just a portion of the requested refund is processed, often for reasons not adequately disclosed to the company.
To receive the entire amount owed in tax returns, a thorough discussion with the tax authorities is necessary. There are two ways to communicate with the tax authorities:
- In-person or virtually
- Online portal
We, a team of experts at Mercurius, can help you handle all your tax refund-related matters.
Tax Planning Strategies
Effective tax planning allows companies to minimize their tax liabilities using legitimate strategies, including deductions, credits, and exemptions, while ensuring full compliance with tax laws.
Strategies
- Investment in tax-saving instruments
- Optimizing depreciation benefits
- Utilizing available deductions
Withholding Tax
Withholding Tax, also known as Tax Deducted at Source (TDS), is the tax deducted by the payer when making payments to the payee.
Applicability
It applies to various types of payments, such as salaries, interest, rent, and royalties.
Rate
The withholding tax rates vary based on the nature of the payment and the residential status of the payee.
Compliance
Companies must deduct and deposit these taxes within the prescribed timelines to avoid penalties.
- All income payers report the taxes they withhold from income to the firm in their tax withholding returns.
- The company can view these reports in its tax portal account.
- The tax payment submission via the portal serves as the foundation for the Company’s credit claim.
Any Company making payments of a certain nature is required to withhold income tax and deposit it with the government of India. Some of the expenses that require withholding tax are as follows:
| Payment in nature of Rent | Rates before Oct 1, 24 | Rates from Oct 1, 24 | Limits |
|---|---|---|---|
| Plant & Machinery | @2% | @2% | If it exceeds Rs. 2.4 Lacs in a year |
| land, building, or furniture | @10% | @10% | If it exceeds Rs. 2.4 Lacs in a year |
| Professional service | @10% | @10% | If it exceeds Rs. 30,000 in a year |
| Technical service | @2% | @2% | If it exceeds Rs. 30,000 in a year |
| Royalty or FTS | @10% | @10% | If it exceeds Rs. 30,000 in a year |
| Royalty for sale, distribution, or exhibition of cinematographic films | @2% | @2% | If it exceeds Rs. 30,000 in a year |
| Commission and brokerage | @5% | @2% | If it exceeds Rs. 5,000 in a year |
| Contractual Services | |||
| Other than individual/HUF | @2% | @2% | If it exceeds Rs. 30,000 for a Single payment or 1,00,000 aggregate payments during the year |
| To individual/HUF | @1% | @1% | If it exceeds Rs. 30,000 for a Single payment or 1,00,000 aggregate payments during the year |
| Dividend on shares/ Mutual funds | @10% | @10% | If it exceeds Rs. 5,000 in a year |
| Purchase of immovable property | @1% | @1% | If it exceeds Rs. 50 Lacs in a single property deal |
*The list given above is not exhaustive and may vary depending on the type of transaction.
The company is required to file quarterly tax withholding returns. In India, the due date for filing withholding tax returns (TDS returns) by a company are as follows:
| Type of TDS Return | Quarter Ending | Due Date for Filing TDS Return |
|---|---|---|
| 1st Quarter | April-June | 31 July |
| 2nd Quarter | July-September | 31 October |
| 3rd Quarter | October-December | 31 January |
| 4th Quarter | January-March | 31 May |
Mercurius seamlessly navigates and lightens the tax burden with its expert solutions. Our tax assurance services give you confidence and peace of mind for all your tax requirements. Our team of experts reviews your financial records and tax filings with assurance of accuracy and compliance with each regulation update. The comprehensive approach and attention to detail have built trust over the years to identify potential risks, optimize tax strategies, and ultimately enhance your overall financial performance.
Corporate Tax Services
Our corporate tax services are tailored to assist businesses in minimizing their tax burdens while adhering to regulatory requirements. We offer the following services:
Corporate Tax Planning
We provide customized tax strategies to our clients and businesses, helping them leverage available tax advantages and reduce overall tax exposure.
Corporate Tax Compliance
Our experts provide professional guidance and services related to all necessary tax fillings, including detailed reviews of financial statements. This ensures regular adherence to tax laws and obligations.
Income Tax Accounting
At Mercurius, our experts deliver precise and prompt tax accounting services to effectively manage clients’ income tax responsibilities.
Audit Assistance
We offer support during tax audits, ensuring compliance with regulatory standards. Our team partners with auditors to streamline the audit process, reducing potential disruptions to your operations.
Issuance of Certificates
At Mercurius, our experts deliver precise issuance of various certificates as required by government authorities or bankers, such as Capital contribution certificates, Gross turnover certificates, debt aging certificates, closing stock certificates, profitability certificates, and Net worth certificates. In relation to corporate mergers and acquisitions, we also provide our certification services, such as Fair value certificates for shares and share movements (including Buy-back, allotment, etc.). Further, our tax / FEMA compliance experts help in the issuance of various certificates as required under the Income tax, GST, FEMA regulations, STPI regulations, etc, in the given prescribed format duly acceptable by the respective authorities.
Due Diligence Services
We conduct thorough due diligence on corporate tax matters and potential disputes, helping clients pinpoint risk areas, enhance financial statements and tax compliance transparency, and prepare you for any tax-related challenges.
International Tax Advisory
We provide professional planning services, using our in-depth knowledge of worldwide tax regulations to help businesses operating globally navigate complex international tax obligations.
Why Choose Mercurius for Corporate Tax Services?
When it comes to tax services, clients trust us as their top choice because of our proven expertise and commitment to excellence.
Expert Team
Our seasoned professionals possess extensive knowledge of tax laws, ensuring that every aspect of your tax compliance is handled with precision and efficiency.
Personalized Service
We take the time to understand your unique financial situation, tailoring our strategies to meet your specific needs and goals.
Proactive Compliance
We approach tax compliance with future assessments in mind, striving to keep our clients always prepared and ready for any tax assessment.
Trusted Reputation
Our commitment to integrity, reliability, and client satisfaction underscores the high quality of service you can expect from us.
Simplify Corporate Tax. Amplify Growth.
From filings to advisory, we help you minimize risks, stay compliant, and unlock tax efficiencies that fuel your business growth.
Book a Corporate Tax Consultation
FAQs
Corporate income tax is applied to a company’s profits (where a company is defined as a separate legal entity from its shareholders). In contrast, individual income tax is levied on individuals’ earnings, known as personal income tax. It is paid by individual taxpayers according to different tax brackets at varying rates, depending on the individual's income level.
The income tax rate for domestic companies (private and public ltd. companies in India) depends on their profits.
For domestic companies, the tax rate is 25% if the turnover is up to Rs 400 crore, and 30% if it exceeds that amount. However, companies can choose concessional tax regimes under Section 115BAA (22%) or 115BAB (15% for new manufacturing units).
In the case of an LLP, it is 30% but has no option to opt for concessional tax regimes (115BAA/115BAB) and no dividend distribution tax (unlike companies).
For foreign companies setting up in India, the tax rate is generally 40%, with 50% on specific royalty or technical service income. Surcharge and CESS apply additionally based on income levels.
Determining taxable profits involves carefully calculating each entry in the books of account, following accounting principles and tax regulations, while ensuring compliance with laws and optimizing deductions to minimize tax liabilities and maximize after-tax income. In simple terms, corporations determine taxable profits by calculating total revenue and subtracting allowable expenses, depreciation, and business-related costs. Adjustments for tax credits, carry forwards, and non-deductible expenses are then applied. The resulting amount is taxable income.
Corporate tax planning is the process by which a company manages its finances to minimize its tax liability in a legally compliant manner. It involves making judicious use of tax benefits, deductions, and exemptions, as well as applicable tax laws, to ensure the company pays the least possible tax while remaining fully compliant with regulations. Its cost depends on factors like the size and nature of your business, the complexity of transactions, the number of entities involved, and the depth of advisory services required.
There are several important benefits of corporate tax filing mentioned below:
- It gives your business a legal recognition that is compliant and officially registered under the Indian corporate laws (like the Companies Act 2013).
- It provides limited liability protection for entities such as private limited companies and LLPs, shielding the personal assets of owners from business liabilities.
- Regular filings, such as annual returns and financial statements, increase transparency, which helps attract investors and partners.
- Timely filing of returns (including income tax, GST, TDS, etc.) helps avoid penalties and maintain a good standing with tax authorities.
In order to file corporate taxes in India, businesses usually require:
- PAN, TAN, and Certificate of Incorporation
- Audited financial statements (P&L, Balance Sheet)
- Tax audit report (Form 3CA/3CB & 3CD)
- Tax computation sheet
- GST and TDS returns
- Bank statements, invoices, and tax challans
- Details of deductions, depreciation, and carry-forward losses
All Indian businesses are required to file Income Tax Returns (ITR), regardless of whether they incur profits or losses during the fiscal year. Filing helps keep accurate financial records and ensures compliance with tax laws. Our professionals are well-equipped with the latest knowledge of corporate ITR and can help you file your ITR and manage tax planning. For more information, please do not hesitate to contact us.
Operating across borders brings added complexity to corporate tax filing. Key considerations include:
- Double Taxation: Income may be taxed both in India and the foreign country. Double Taxation Avoidance Agreements (DTAAs) help reduce this burden.
- Transfer Pricing: Transactions between related entities must follow arm’s length pricing to avoid scrutiny and penalties.
- Withholding Taxes: Payments such as royalties, interest, or technical fees to foreign entities may be subject to withholding taxes in India.
- Global Compliance: Businesses must comply with tax laws in every country where they operate, which increases the administrative workload and the need for expert guidance.
Several tax exemptions and incentives are available to help businesses reduce their corporate tax burden:
- Tax holidays and deductions for businesses operating in Special Economic Zones or notified backward areas
- Deductions for companies that create new jobs or expand their workforce
- Tax benefits for investing in innovation, scientific research, and technology development
- Special provisions for eligible startups and small businesses under various government schemes
