What is Corporate Tax in India?

Corporate tax is the tax paid by registered corporations in India. It is not paid by sole proprietorships or partnership firms in the country. The domestic companies as well as the foreign companies in India are liable to pay this tax. Generally, domestic companies pay less corporate tax than the foreign companies. 

In this blog post, we shall explain to our readers what is corporate tax in India in a simple and easy manner. We shall also provide them with the corporate tax rates for the domestic and foreign companies for AY 2026-2027. 

Corporate Tax Meaning

A corporation/company is a separate legal entity from its shareholders. It is regarded as an artificial person created by the law. It has the right to sue and be sued, enter into contracts and own properties in its own name. Under the Income Tax Act in India, the domestic companies as well as the foreign companies are liable to pay corporate tax. This tax is a type of direct tax levied by governments on the profits/net income earned by corporations.

In case of domestic companies, corporate tax is levied on their universal income. However, in case of foreign companies, corporate tax is levied on the income earned within India, i.e., income that is being accrued or received in India.

Corporate Tax Slab in India for Domestic Companies

Here’s the corporate tax slab in India for domestic companies. With the help of this slab, you can learn about the domestic companies corporate tax rate in India for AY 2026-2027 :-

Note :- It is important to note that the income tax calculated shall be increased by a surcharge. (i) Where a company’s total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore, the surcharge shall be 7% of the income tax. (ii) Where the total income exceeds Rs. 10 crore, the surcharge shall be 12% of the income tax. 

However, in the case of a company opting for taxation under Section 115BAA or Section 115BAB, the surcharge shall be 10% of the income tax, irrespective of the amount of total income.

Corporate Tax Slab in India for Foreign Companies

Here’s the corporate tax slab in India for foreign companies. By going through this slab, you can learn about the foreign companies corporate tax rate in India for AY 2026-2027 :-

Note: If total income exceeds Rs. 1 crore but does not exceed Rs. 10 crore, income tax is increased by a surcharge at the rate of 2%, and if total income exceeds Rs. 10 crore, the surcharge is levied at the rate of 5%. However, marginal relief is available so that where income exceeds Rs. 1 crore but does not exceed Rs. 10 crore, the total tax payable (income-tax plus surcharge) does not exceed the tax payable on Rs. 1 crore by more than the amount of income exceeding Rs. 1 crore, and where income exceeds Rs. 10 crore, the total tax payable does not exceed the tax payable on Rs. 10 crore by more than the amount of income exceeding Rs. 10 crore. 

Further, health and education cess at the rate of 4% is levied on the total amount of income tax and surcharge. A foreign company is liable to pay Minimum Alternate Tax (MAT) if the tax payable under the normal provisions of the Act is less than 15% of its book profit, in which case the book profit is deemed to be its income and tax is payable at the rate of 15% on such book profit. 

However, MAT provisions do not apply to a foreign company if it does not have a permanent establishment in India or if it opts for presumptive taxation under Sections 44B, 44BB, 44BBA or 44BBB.

Conclusion

Corporate tax means the tax that the corporations must pay in India, including the domestic corporations and foreign corporations. In case of domestic corporations, the corporate tax is applicable on their universal income. However, in case of foreign corporations, the corporate tax is applied on the income they have generated within India.

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Frequently Asked Questions (FAQs)

Q1. Do foreign companies need to pay corporate tax in India?

A. Yes, the foreign companies need to pay corporate tax on the income they have earned in India. 

Q2. Do domestic companies pay less corporate tax than the foreign companies in India?

A. Yes, the domestic companies usually pay less corporate income tax as compared to the foreign companies. 

Author: Dushyant Sharma

Hey there, I'm Dushyant Sharma. With the extensive knowledge I've gained in past 8 years, I have been creating content on various subjects such as banking, insurance, telecom, and all the important registration and licensing processes for various companies. I'm here to help everyone with my expertise in these areas through my articles.