Corporate tax
Also called: Corporation tax · Topic: Taxation: Direct and Indirect Taxes, GST and Global Tax Issues · NCERT: Class 11, Ch 3 "Liberalisation, Privatisation and Globalisation: An Appraisal"; Class 12, Ch 2 "National Income Accounting"; Class 12, Ch 5 "Government Budget and the Economy"
Meaning
Corporate tax (corporation tax) is a direct tax on company profits, charged at a proportional (flat) rate. It is paid by the company, so the money never reaches households. That is why NCERT subtracts it from National Income when working out Personal Income. In September 2019, India cut the rates:
- Sec. 115BAA: 22% for firms that give up exemptions. With surcharge and cess, the effective rate is about 25.17%.
- Sec. 115BAB: 15% for new manufacturing firms that started production by March 2024.
Example
A company with ₹100 crore profit that chooses Sec. 115BAA pays about ₹25.17 crore in tax, including surcharge and cess. It cannot also claim the old exemptions.
Don't confuse with
- Minimum Alternate Tax (MAT): MAT is a minimum tax of 15% (since 2019) on a company's book profits, charged when its normal tax works out lower. It is not charged on firms under 115BAA.
Related concepts
- Income tax
- Minimum Alternate Tax
- Capital gains tax
- Securities Transaction Tax
- Angel tax
- Wealth tax and inheritance tax
- Paper taxes
- Tax deducted at source
- Faceless assessment