Taxable Corporate Income

Corporate Sector Taxes :

The taxability of a company's income depends on its domicile. Indian companies are taxable in India on their worldwide income. Foreign companies are taxable on income that arises out of their Indian operations, or, in certain cases, income that is deemed to arise in India. Royalty, interst, gains from sale of capital assets located in India (including gains from sale of shares in an Indian company), dividends from Indian companies and fees for techincal services are all treated as income arising in India.

Domestic Corporate Income Taxes Rates
	Tax Rate	Effective Tax Rate with surcharge
Domestic Corporations	30%	30%1

Note :-

• A surcharge of 10% of the income tax is levied, if the taxable income exceeds Rs. 1 million.
• All companies incorporated in India are deemed as domestic Indian companies for tax purposes, even if owned by foreign companies.

Foreign Companies Tax Rates
	Withholding Tax Rate for non-treaty foreign companies	Tax Rate for US companies under the treaty
Dividends	20%	15%1
Interest Income	20%	15%2
Royalties	30%	20%2
Technical Services	30%	20%2
Other Income	55%	55%

Note :-

• Inter-corporate rates where there is minimum holding.
• 10% or 15% in some cases.
• Withholding tax is charged on estimated income, as approved by the tax authorities.
• There are other favorable tax rates under various tax treaties between India and other countries.

Asessing taxable income

In ascertaining taxable income, all expenditure incurred for business purposes are deductible. This includes interest on borrowings paid in the financial year and depreciation on fixed assets. Certain expenses are specifically disallowed or their quantum of deduction is restricted. These include :

• Entertainment expenses
  
• Interest or other amounts paid to a non-resident without deducting without tax
  
• Corporate taxes paid
  
• Indirect general and administrative costs of a foreign head office.