Blogs

 Home / Blogs

An insight into corporate tax norms in India


As an entrepreneur, it is important to consult your direct tax consultants in Mumbai in order to organise your company’s tax matters in time and in compliance with the laws. Tax professionals are adept at resolving legal matters associated with corporate tax.


The Indian tax system is categorized into two distinct parts. One is direct tax and the other is indirect tax. Direct tax is tax that is levied on the income of a business in a said financial year. Indirect tax forms part of the value chain, being applied to products and services at every stage of successive value added.


Direct tax consultants in India are aware that there are several categories of taxpayers that are registered with the Income Tax department. Additionally one should also keep this in mind that the rates at which they pay their taxes to the government are all different. A salaried individual and a company won’t be paying similar taxes since the percentage of the charges levied on them will be different.


For ease of understanding, Direct Tax is again sub-divided into the following categories:


• IT (or Income Tax): This is paid by an individual taxpayer (salaried) on the income earned by them either on a monthly or annual basis. The taxes levied on them are of different rates. For salaried individuals, tax is deducted from the gross salary by the employer.


• CT (or Corporate Tax): This is paid by companies and is charged on the net profit they earn each financial year. The rates change often and are set by the Indian Income Tax Department.


A brief of Corporate Tax in India


Both domestic and foreign businesses are liable to pay taxes as per the Income Tax Act. That being said, a domestic company is liable to pay taxes based on its universal income whereas a foreign company is usually liable to pay the taxes on the net income it has made within the boundaries of the nation.


Read the following sections for more insights


• Foreign Company: is a business entity that is not registered in India and has its headquarters, administrators and management department located outside of the nation. In such cases, a foreign company is liable to pay about 40 percent of its net income as taxes to the central government. However various tests of permanent establishment and place of effective management are applicable.


• Domestic Company: is a business entity that is registered in India and has its headquarters, administrative department and management all located within the nation. In such cases, the company is liable to pay around 25% as taxes to the Central Government of India, especially if its turnover is less than INR 250 Crores in a financial year. If the turnover surpasses the INR 250 Crores mark, the company will need to pay 30 percent as taxes to the authorities. Surcharge is additional and is driven by the taxable income / profit, and a cess is applicable to all taxes.


Conclusion


Indian Corporate Tax has a complicated set of regulations that need to be followed. To be on the right side of the law, companies need to comply with the norms and to do that, it is best to get in touch with the Best Tax Consultant In India right away.