Calculation of corporate tax for A.Y. 2011-12 and 2012-13
Corporate tax will now be simpler and easier. Here you can learn the simple ways of company tax computation.
Corporate tax definition
Corporate tax is the tax which is levied on profits of companies by state or central government of the country. As we all know, company is a separate legal entity having recognition distinct from its owners/ shareholders. The terms of tax varies according to the origin place of the company which can be either a domestic company or foreign company.How to compute corporate tax in India
The corporate tax calculation for A.Y. 2011-2012 will be done on following basis:
Corporate tax for domestic company: Domestic company means a company formed and originated in India. It can also be a subsidiary Indian unit of a foreign company. Tax is calculated @ 30% (including surcharge) on profits generated by the company (up to ` 1 million) either in India or outside India. However, if the amount of profit or income is more than ` 1 million, then an extra surcharge of 10% on taxable amount is also levied.
Corporate tax for foreign company: Foreign company means a company which is formed and originated outside India but running its business activities within India. in this case, tax is levied only on income generated within Indian territory, including income from capital assets in India, interest received on investments, royalty income, income from dividend, sale of shares, equity, etc.
Tax on foreign companies is further sub categories into two: Non Treaty Foreign Companies and Foreign Companies under Treaty. Tax computation on Non Treaty Foreign Companies is as follow:
- 20% on dividend and interest gains
- 30% on royalty and fees for technology based services.
- 55% on any other incomes and gains.
Foreign Companies under Treaty is as follow:
- 15% on dividend and interest gains
- 20% on royalty and fees for technology based services.
- 55% on any other incomes and gains.
Other factors which should be considered while calculation are:
- If foreign holding is minimum, then consideration should be given on levying inter corporate rates.
- Restrictions on tax withholding for tax authorities should also be considered.
- In some cases, the tax is levied on the companies of some nations on a different rate according to Tax treaties signed by India with such other countries
Companies can also take corporate tax rebate on following items:
- lower tax is levied on long term capital gains.
- Special tax provisions are provided to venture capital funds as well as venture capital companies.
- MAT (Minimum Alterative Tax) is levied on companies according to Finance Bill 1996.
Calculation for A.Y. 2012-13 is also estimated to remain same except a few changes. Details of 2012-13 corporate tax calculation will soon be published on this site. To get investment updates, register yourself for free on investmentpaths.com in just 1 minute.