Finance Minister, Nirmala Sitharaman announced in Budget 2024 that corporate tax for foreign companies has been reduced from 40% to 35%. The move was initiated to encourage the foreign investment in the country. Currently, India has two different corporate tax slabs for domestic and foreign companies. Below is a comparison of them.
Corporate Taxes for Domestic Companies from AY 2020-21
| Sections | Tax rate | Surcharge |
| Section 115BA (Companies having turnover up to Rs 400 crore in FY 2017-18) | 25% | 7%/12%* |
| Section 115BAA | 22% | 10% |
| Section 115BAB | 15% | 10% |
| Any other case | 30% | 7%/12%* |
- * If a company is taxed under section 115BA, the surcharge rate is 7% if the total income exceeds one crore rupees but does not exceed Rs 10 crore. The surcharge increases to 12% if the total income exceeds Rs 10 crore. However, if a company chooses to be taxed under section 115BAA or section 115BAB, the surcharge is 10%, regardless of the total income.
Corporate Taxes for Foreign Companies from AY 2025-26
| Nature of Income | Tax Rate |
| Royalty received or fees for technical services from the government or any Indian concern under an agreement made before April 1, 1976, and approved by the Central Government | 50% |
| Any other income (From AY 2020-21 to AY 2024-25, this is taxed at 40%) | 35% |
There are certain surcharges and taxes which are to be paid by the domestic and foreign companies in addition to the taxes listed above. These taxes and surcharges are:
Health & Education Cess: An additional 4% of the calculated income tax, along with any applicable surcharge, will be added to the total tax liability before this cess is applied.
Minimum Alternate Tax (MAT): All companies, including foreign companies, must pay a minimum alternate tax at a rate of 15% on book profits if the tax calculated under the standard rates is less than 15% of their book profits. This requirement applies unless the company opts for taxation under Section 115BAA or Section 115BAB.
Other Surcharge Rates:
| Particulars | Tax Rate |
| If total income exceeds Rs. 1 crore but not Rs. 10 crore | 7% of the tax calculated for a domestic company or 2% of the tax calculated for a foreign company, as per the rates mentioned above. |
| If total income exceeds Rs. 10 crore | 12% of the tax calculated for a domestic company or 5% of the tax calculated for a foreign company, based on the rates mentioned above. |
Conclusion
Corporate taxes are divided into several categories that need to be analysed and filed with the help of a financial expert like CA. You can contact us to reach the best Chartered Accountancy firm for handling your direct and indirect taxes.