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Unit 11: Computation of Taxable Income of Companies

Tax Rates for Companies Notes

The corporate tax rate in India is at par with the tax rates of the other nations worldwide. As
mentioned above the corporate tax rate in India depends entirely on the origin of a company. In
India the corporate tax rates differ with regards to the nature of the ownership of the company
and their income.
1. Tax rates for Domestic Corporate & LLP Income Taxes Rates

Table 11.1: Domestic Corporate and LLP Tax Rates

Company Type Tax Rate Effective Tax Rate with
surcharge & Education cess
Domestic Corporations or Private 30% 33.99%*
Limited Companies
Domestic Corporations or Public 30% 33.99%*
Limited Companies
Limited Liability Partnership (LLP's) 30% 30.9%**

* For the above tax rates a surcharge of 10% of the income tax is levied, if the taxable income exceeds
` 1 million. Educational cess is also added.
** An Educational Cess is added to the basic tax rates. Surcharge is not applicable to LLP. Unlike LLP’s
in the USA where they are pass-through entities for tax purposes, in case of LLP’s in India, they are
partially pass-through entities for tax purposes. In India tax an LLP is required to pay income tax on
40% of its income; since an LLP is allowed to pay the balance of 60% as remunerations to it partners.
Partners of an LLP are required to pay tax on the amount paid to them. Besides, LLP’s are not required
to pay dividend distribution tax or Minimum Alternate Tax (MAT).
2. All companies incorporated in India are deemed as domestic Indian companies for tax
purposes, even if owned by foreign companies.
Table 11.2: Foreign Corporate Income Tax Rates

Type of Income Withholding Tax Rate for Withholding Tax Rates for the USA
non-treaty foreign companies Companies Doing Business in India
under the India USA Tax Treaty
Dividends 20% 15%*
Interest Income 20% 15%**
Royalties 30% 20%**
Technical Services 30% 20%**
Other income 55% 55%

* Inter-corporate rates where there is minimum holding. The tax rates are applicable under the India USA
Tax Treaty. For other countries the tax rates are different under the tax treaties between India and other
countries, including Australia, Austria, Bangladesh, Belgium, Brazil, Belarus, Bulgaria, Canada, China,
Cyprus, Czechoslovakia, Denmark, Finland, France, Germany, Greece, Hungary, Indonesia, Israel,
Italy, Japan, Jordan, Kazakhstan, Kenya, Libya, Malta, Malaysia, Mauritius, Mongolia, Namibia,
Nepal, Netherlands, New Zealand, Norway, Oman, Philippines, Poland , Qatar , Romania, Singapore,
South Africa , South Korea , Spain , Sri Lanka , Sweden, Switzerland, Syria, Tanzania, Thailand,
Trinidad & Tobago, Turkmenistan, Turkey , U.A.E. , U.A.R., U.K., U.S.A., Russian Federation,
Uzbekistan, Vietnam and Zambia
** 10% or 15% in some cases.
In addition following should be noted:
a. Withholding tax is charged on estimated income, as approved by the tax authorities.
b. There are other favourable tax rates under various tax treaties between India and other countries.

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