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INTRODUCTION TO CORPORATE TAX

DEFINITION

Corporate tax simply means tax on corporations / companies on profits generated by them. A levy placed on the profit of a firm, with different rates used for different levels of profits. Corporate taxes are taxes against profits earned by businesses during a given taxable period; they are generally applied to companies’ operating earnings, after expenses. It is a type of “Direct Tax” and is governed by CBDT (Central Board of Direct Taxes) under the

Finance Ministry. The provisions for the same are provided and regulated through :
– Income Tax Act, 1961
– Income Tax Rules, 1962
BREAKING DOWN ‘Corporate Tax’

Corporate tax rates and laws vary greatly around the world, as different governments and countries view corporate taxation in different ways. For example, those in favour of lower corporate tax rates point to the possibility for greater economic production if companies are taxed less. While others see higher corporate tax rates as a way to subsidize government spending and programs for the nation’s citizens.

ARE ONLY INDIAN COMPANIES SUBJECT TO TAX IN INDIA ?

No, even foreign companies are charged to corporate tax if their earnings get received, accrued or deemed to receive / accrue in India, though at a different rate as would be specified later in detail.

Public and private – both types of companies attract corporate tax including, but not limited
to, banking and insurance companies as well.

DDT (Dividend Distribution Tax)
DDT is the tax to be paid by company on distribution of dividends to its shareholders Upto 30.09.2014, the tax rate of 15% was applied on the actual dividend distributed. Bur w.e.f 1.10.2014, the amount of dividend distributed shall be presumed as 85% and shall be grossed to 100%, then 15% shall be applied on such gross amount adding surcharge and cess.

So, in short you have to apply an effective tax rate of 19.994% on Rs.100, however subject to reduction as per Sec 115-O(1A) on dividend received from subsidiary

CORPORATE TAX RATES
A.) FOR DOMESTIC COMPANIES
• As per the corporate tax rates for the 2015-16 fiscal, domestic companies, are levied with an Income tax at the rate of 30% FLAT (i.e. even on 100 Rs. of income, Tax @ 30% has to be paid)
• Surcharge is applied on tax in the following cases:

 INTRODUCTION TO CORPORATE TAX

INTRODUCTION TO CORPORATE TAX

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