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.
