In a direct taxation system such as in India, the income made by an individual or a business entity is taxed as per the prescribed rate. Depending on the categories of taxpayers, this direct tax can be subdivided into personal and corporate tax.

This article summarises the essential aspects of corporate tax in India. Hence, interested readers must keep reading to know more about it.

Corporate taxation in India is applicable for companies of all sizes and industries. So, corporate tax meaning is the tax levied by the government on a company’s net income or profits.

A company’s taxable income is calculated by deducting the cost of goods sold (COGS), general and administrative (G&A) expenses, selling and marketing, depreciation, research & development, etc., from the company’s revenue.

A corporate tax is a direct tax chargeable on the income earned by foreign and domestic companies in India. While corporate tax on a domestic company is levied on its universal income, corporate taxation for a foreign company is only applicable on the income earned within India.

Knowing about the components that constitute the total income of a company is essential to compute corporate tax on it. Here are the following types of income that makes up the income of a company:

• Profits
• Capital gains
• Income arising from renting a property
• Additional sources of income, such as interest and foreign dividends

Once an individual understands what comprises an income of a corporation, it's easier to calculate its net income. A corporation usually calculates corporate tax on net revenue. The latter is the remaining amount after deducting the required expenses from income. The components of income have been discussed above. Now, the expenditures of a corporate include:

• Depreciation
• The cost of selling commodities
• Expenditures associated with administrative purposes, etc.

Thus, after assessing both, use the following formula to calculate the net income of a corporate-

Net Income = Gross Income – (Expenditures + Depreciation)

Take a look at the following table that highlights the corporate tax rate in India:

Corporate Tax Rate for Domestic Companies for FY 2024-25

Corporate Tax Rate for Foreign Companies for FY 2024-25

Following are the surcharge rates and additional cess for FY 2024-25, which are to be added to the rates mentioned above:

Here is the list of tax rebates available on income tax on business income:

• A domestic company can eliminate the dividends received from another domestic company while calculating its income.
• Deductions are available for new undertakings and exports.
• A company can claim deductions on newly established infrastructure and power sources.
• Certain provisions are available for venture capital enterprises and funds.
• A company can take forward a business loss for up to 8 years.
• In specific cases, deductions are applicable on dividends, interest and capital gains.

Knowing about the details of corporate tax in India will assist a company in planning their finances in advance and managing their tax liabilities accordingly. However, one can get help from professionals to avoid any inconvenience later.