Taxability of Company

Corporate Tax Rates

Turnover Particulars	Tax Rate
Gross turnover up to 400 Cr. in the FY 2017-18	25%
Gross turnover exceeding 400 Cr. in the FY 2017-18	30%
Where the company opted for Section 115BA	25%
Where the company opted for Section 115BAA	22%
Where the company opted for Section 115BAB	15%

In addition cess and surcharge is levied as follows:

Cess: 4% of corporate tax

Surcharge applicable

Income Limit	Surcharge Rate on the amount of income tax
Net income exceeds Rs.1 Crore but doesn’t exceed Rs.10 Crore	7%
Net income exceeds Rs.10 Crore	12%

However, the rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective of amount of total income.

If company is opting for special taxation regime u/s 115BA / BAA / BAB needs to sacrifice on following deduction from its gross total income while arriving at taxable income.

Claiming any deduction especially available for units established in special economic zones under section 10AA
Claiming additional depreciation under section 32 and investment allowance under section 32AD towards new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal
Claiming deduction under section 33AB for tea, coffee and rubber manufacturing companies
Claiming deduction towards deposits made towards site restoration fund under section 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India
Claiming a deduction under Section 35 for expenditure on scientific research, or an amount paid to a university or research association or National Laboratory or IIT.
Claiming a deduction for the capital expenditure incurred by any specified business under section 35AD
Claiming a deduction for the expenditure incurred on an agriculture extension project under section 35CCC or on skill development project under section 35CCD
Claiming deduction under chapter VI-A in respect to certain incomes, which are allowed under section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction under section 80JJAA and 80M.
Claiming a set-off of any loss carried forward or depreciation from earlier years, if such losses were incurred in respect of the aforementioned deductions
A claim by an amalgamated company for set-off of carried forward loss or unabsorbed depreciation belonging to an amalgamating company if such loss or unabsorbed depreciation is on account of the above deductions; claiming a deduction for additional/accelerated depreciation. The normal depreciation can however be claimed.
The above losses shall be deemed to have been allowed and shall not be eligible for carry forward and set off in subsequent years this means that if the company opts for 115BAA then the opportunity for claiming set off is lost forever

Effective tax rate applicable to more than 95% of Indian companies is 25.168% which is much lower than effective tax rate of anu other class of person (individual / partnership / LLP)

Dividend Taxation

Till FY 2019-20 corporate have to shell out additional tax called dividend distribution tax while declaring dividend (profit payout) at rate of 20.67% however from FY 2020-21 corporate is not obligated to pay dividend distribution tax instead TDS needs to be withheld at the rate of 10% which can be availed as credit.

Taxability of dividend income in hands of shareholder

From FY 2020-21 dividend income is taxed in hands of shareholder at the rate applicable to such shareholder however if shareholder is company then dividend received from other Indian / foreign company can be availed as deduction provided such company declares dividend higher than dividend that they have received.

A) Tax Rate for Indian Company is summarized in table below

Taxable Income (in INR)	Tax Rates
Gross receipts/Turnover is up to Rs. 400 Crores in previous year 2017-18	25%
Section 115BA: Tax on income of certain manufacturing domestic Company	25%
Section 115BAA*: Tax on income of certain domestic Company	22%
Section 115BAB*: Tax on income of new manufacturing domestic company	15%
Any other Domestic Company	30%

B) Comparative analysis of three provisions is as under:

Particulars	115BA	115BAA	115BAB
Eligibility of Nature of Business	Manufacturing	Any Entity	Entities setup after 1.10.2019
Tax Rate	25%	22%	15%
Tax on various other income	Same as above	Same as above	22%
Tax Rate of STCG on depreciable asset	Same as above	Same as above	22%
Income Taxable at Special Rate u/s 111 to 115BBG	No Change in Tax Rate for such Income
Surcharge	7% or 12%	10% flat	10% flat
Splitting up/Reconstruction Entities	Eligible to opt	Eligible to opt	Not Eligible to opt
Installing ‘Used’ Machine/Plant	No restriction	No restriction	Not Allowed beyond 20%
When to exercise option?	Any previous year	Any previous year	FIRST tax return
Restrictions on certain Deduction/Exemption	Yes	Yes	Yes
Tax Payable under MAT	Yes @ 15%	No	No
MAT Credit brought forward (b/f)	Allowed to be claimed	Not allowed to claim	-
MAT Credit b/f Lapses?	Does not Lapse	Lapses	-
Withdrawal of Option	Not Allowed(subject to opting section 115BAA)	Not Allowed	Not Allowed

C) Comparison of Tax Rates with Surcharge and Cess

Particulars	Turnover up to INR 400 Crore in FY 17-18	115BA	115BAA	115BAB	Others
Tax Rate	25%	25%	22%	15%	30%
Surcharge (SC)	Slab wise*	Slab wise*	Flat 10%	Flat 10%	Slab wise*
Health and Education Cess (HEC)	4%	4%	4%	4%	4%
Income Level
upto 1 Crore	26.00%	26.00%	25.17%	17.16%	31.20%
1 Crore to 10 Crore	27.82%	27.82%	33.38%
More than 10 Crore	29.12%	29.12%	34.94%
MAT	Applicable	Applicable	NA	NA	Applicable
Restriction to claim certain deduction/exemption	NA	Applicable	Applicable	Applicable	NA

*Surcharge – Income upto 1 Crore – NIL, from 1 crore to 10 Crore -7%, above 10 Crore – 12%