Page 117 - DCOM508_CORPORATE_TAX_PLANNING

Corporate Tax Planning

Notes Tax Rates for Companies: 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 5.1: Domestic Corporate and LLP Tax Rates

Company Type Tax Rate Effective Tax Rate with
surcharge & Education cess
Domestic Corporations or Private Lim- 30% 33.99% 1
ited Companies
Domestic Corporations or Public Lim- 30% 33.99% 1
ited Companies
Limited Liability Partnership (LLP’s) 30% 30.9% 2

Notes:
*1. 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.
*2. 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 5.2: Foreign Corporate Income Tax Rates
Type of Income Withholding Tax Rate Withholding Tax Rates for the USA Companies
for non-treaty foreign Doing Business in India under the India USA
companies Tax Treaty
Dividends 20% 15% 1
Interest Income 20% 15% 2
Royalties 30% 20% 2
Technical Services 30% 20% 2
Other income 55% 55%

Notes:
*1. Inter-corporate rates where there is minimum holding. There 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
*2. 10% or 15% in some cases.
3. Withholding tax is charged on estimated income, as approved by the tax authorities.
4. There are other favourable tax rates under various tax treaties between India and other countries.

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