Applicable Corporate Tax Rate in India for Assessment Year 2023-24

Corporate Tax

Applicable Corporate Tax Rate in India for Assessment Year 2023-24

Corporate Tax

In India, corporate tax is a type of direct tax that is levied on the profits made by both domestic and foreign businesses. While foreign firms are only subject to taxation on income generated within India, domestic corporations are subject to taxation on their entire worldwide income.

Corporate tax rates are determined by subtracting costs such as depreciation, cost of goods sold, selling general and administration expenditures from a company’s revenues. These deductions are then applied to the company’s earnings. Businesses in the nation pay corporate tax based on their income, which is a major source of funding for the government.

Different Corporate Entity Types

Both domestic and foreign businesses must pay corporate tax. Businesses must pay corporation tax, which is a part of their earnings, just like individuals must pay income taxes. Corporate businesses are required to pay this tax, which is also known as company tax or corporation tax.

A legal construct known as a corporation, or corporate entity, is acknowledged as existing independently of its shareholders. Because of this legal distinction, the company is separate from its stockholders and has its own rights and obligations. The idea of a business having its own legal personality guarantees that it is separate from its owners or managers and that it must pay taxes and comply with legal requirements.

There are two kind of corporations:

Domestic Corporations:

These businesses were founded and registered in accordance with the 2013 Companies Act of India. Even though a foreign firm is foreign in origin, it might be included in a domestic corporation if all of its management and control are located in India.

Foreign Corporations:

These are businesses that are based outside of India, abroad. A foreign corporation continues to be recognized if any portion of its management or control is based outside of India. In the Indian context, a company is considered a foreign corporation if the primary decision-making power is located outside of India.

Corporate Tax Rate

Depending on the kind of business, different corporation tax rates apply. One rate of taxation applies to domestic corporations, which are businesses registered under the Companies Act of 2013. In contrast, foreign corporations pay taxes at a different rate.

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LEGAL WAYS TO SAVE INCOME TAX FOR BUSINESS OWNERS

1. Utilizing Business Expenses and Deductions:

Businesses can claim deductions for various expenses incurred in the course of their operations. Some important deductions include:

 

 

  • Rent, utilities, and maintenance expenses for business premises.
  • Salaries and wages paid to employees.
  • Advertising and marketing expenses to promote the business.
  • Professional fees paid to consultants, accountants, and lawyers.
  • Office supplies and expenses.
  • Travel and conveyance expenses related to business purposes.
  • Depreciation of assets used in the business.

 

 

2. Investment Incentives:

The Indian government offers investment incentives to promote specific sectors and regions. These incentives may include:

 

 

save income tax

 

 

  • Tax holidays: Certain industries or businesses operating in specified regions may be eligible for a tax holiday, where they are exempted from paying income tax for a specific period.

 

  • Reduced tax rates: Some sectors may enjoy lower tax rates compared to the standard corporate tax rate.

 

  • Accelerated depreciation: Businesses investing in eligible assets may be allowed to claim higher depreciation rates, resulting in higher tax deductions.

 

 

3. Research and Development (R&D) Benefits:

Businesses engaged in R&D activities can avail themselves of tax benefits under Section 35(2AB) of the Income Tax Act. They can claim a deduction of 150% of the eligible R&D expenses incurred. In certain cases, a weighted deduction of 200% may be available.

 

 

4. Deducting Startup Expenses:

Startups in India can deduct certain costs incurred before commencing business operations. These pre-establishment expenses can be amortized and deducted over a period of five years from the year of commencement of business.

 

 

save income tax

 

5. Capital Gains and Indexation:

When selling assets such as property or shares, businesses can utilize indexation benefits for long-term capital gains. Indexation allows adjusting the purchase price of the asset for inflation, reducing the taxable capital gain.

 

 

6. Tax Benefits for Exporters:

Export-oriented businesses can avail themselves of tax benefits under various schemes, including:

 

  • Export Promotion Capital Goods (EPCG) scheme: Allows import of capital goods at concessional customs duty rates.

 

  • Duty-Free Import Authorization (DFIA) scheme: Provides exemption from customs duty and additional duties for inputs used in the export product.

 

  • Export Oriented Unit (EOU) scheme: Offers tax benefits, duty exemptions, and reduced compliance requirements for units engaged in export activities.

 

 

7. Employee Benefits:

Providing employee benefits such as health insurance, contribution to the Employee Provident Fund (EPF), and National Pension Scheme (NPS) can offer tax advantages for both the business and employees. Contributions made to these benefits are often tax-deductible for the business.

 

 

8. Choosing the Right Business Structure:

The choice of business structure can impact the tax liability. Businesses need to consider factors such as the nature of operations, scale of business, compliance requirements, and future expansion plans. Structures like sole proprietorship, partnership, limited liability partnership (LLP), or private limited company have different tax implications.

 

 

save income tax

 

9. Tax Planning and Consultation:

Engaging with tax professionals or consultants who are well-versed in Indian tax laws can help businesses effectively plan their tax strategies. They can provide guidance on taxefficient practices, identify available deductions and incentives, and ensure compliance with applicable tax laws.

 

 

10. Compliance with Goods and Services Tax (GST):

Businesses need to comply with the provisions of the Goods and Services Tax (GST) regime. This includes timely filing of GST returns, accurate maintenance of records, proper classification of goods and services, and claiming eligible input tax credit.

 

 

Read More: AIS, TIS AND FORM 26AS IN INCOME TAX

 

 

Business owners should consult with tax professionals or advisors who have expertise in Indian tax laws to ensure they maximize the available tax-saving opportunities while maintaining compliance with the applicable provisions. These professionals can provide personalized advice based on the specific circumstances and objectives of the business.

MSME Compliances – Form no 1

As we all are aware that all the Companies are required to file two MSME-1 forms with the concerned authority i.e. Registrar of Companies.

 

Now, we understand which Companies are required to mandatorily file their Form MSME-1.

All companies, who get supplies of goods or services from micro and small enterprises and whose payments to micro and small enterprise suppliers exceed forty-five days from the date of acceptance or the date of deemed acceptance of the goods or services as per the provisions of section 9 of the Micro, Small and Medium Enterprises Development Act, 2006 (hereafter referred to as “Specified Companies”), shall submit a half yearly return

 

 

Timeline of filing of Form MSME-1

a) For the period October to March- 30th April (Due Date)

b) For the period April to September- 31st October (Due Date)

 

 

MSME form 1

 

Criteria for MSME

Definitions of Micro, Small & Medium Enterprises In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) were earlier classified into two classesAn enterprise shall be classified as a micro, small or medium enterprise on the basis of the following criteria, namely:–

 

A Micro Enterprises– Investment in plant and machinery or equipment does not exceed 1 Crore AND Turnover does not exceed five Crore rupees.

 

A Small Enterprises– Investment in plant and machinery or equipment does not exceed 10 Crore AND Turnover does not exceed fifty Crore rupees.

 

A Medium Enterprises– Investment in plant and machinery or equipment does not exceed 50 Crore AND Turnover does not exceed two hundred fifty Crore rupees.

 

The limit for investment in plant and machinery/equipment for manufacturing/service enterprises, are as under:

 

[table id=31 /]

 

 

The term “AND” is used between the two conditions. Therefore, an enterprise should satisfy both conditions to qualify to a Micro, Small or Medium enterprise as the case may be.

 

 

 

Details Required for filing the Return in the form MSME FORM I:

(a) Total outstanding amount due from April to September or October to March as the case may be

 

(b) Particulars of the name of suppliers and amount of payments due

 

    • Financial Years/Particulars
    • Name of Suppliers
    • PAN of Suppliers
    • Amount Due
    • Specify the date from which amount is due

 

(c ) Reasons for Delay in amount of payments due

 

 

Fees for filing of Form MSME-1

There is no such fee for filing of form MSME-1 and also there is no additional fee after due date for filing of form MSME-1.

 

 

MSME form 1

 

Attachments for Form MSME-1

There is no such mandatory attachment for form MSME-1.

 

 

Read More: TAXATION OF CHARITABLE TRUSTS BECOMES MORE COMPLICATED AFTER BUDGET 2023

 

 

Non-Compliance of filing of Form MSME-1

Penalty: The company and every officer in default will be liable to a penalty of Rs. 20,000. In case of continuing failure, the company and every officer in default will be liable for a further penalty of Rs. 1,000 for each day the failure continues, subject to a maximum of Rs. 3 Lakh.