Corporate Income Tax: Key Concepts, Filing Requirements, and Benefits for Businesses

Every company in India, whether private or public, must pay Corporate Income Tax on its profits. Understanding how corporate tax works, including its forms, rates, and exemptions, helps businesses plan their finances efficiently and stay compliant with Indian tax laws.

This guide explains essential concepts like ITR-6, Minimum Alternate Tax (MAT), Alternate Minimum Tax (AMT), and more, all in simple terms for easy understanding.

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What is Corporate Income Tax?

Corporate Income Tax is the tax paid by companies on the profits they earn during a financial year. It is governed by the Income Tax Act, 1961, and applies to both domestic and foreign companies operating in India.

The rate of corporate tax varies depending on the company’s turnover, business type, and whether it has opted for special provisions under specific sections like Section 115BAB.

Corporate tax ensures that companies contribute a fair share to the nation’s economy while encouraging transparency in financial reporting.

Filing Requirements for Corporate Tax

All companies registered in India must file their Income Tax Returns (ITR) annually, disclosing income, deductions, and taxes paid.

Here are the basic filing requirements:

Companies must file ITR-6 if they are not claiming exemption under Section 11 (charitable or religious purposes).
The due date for filing is 31st October of the assessment year.
Filing must be done electronically using a valid Digital Signature Certificate (DSC).
Late filing can attract penalties and loss of certain tax benefits.

Key Benefits of Corporate Tax for Businesses

While it may seem like an expense, paying corporate tax has several indirect advantages:

Builds credibility with investors and banks
Enables access to tax deductions and incentives
Ensures legal compliance and avoids penalties
Enhances company’s reputation and transparency
Contributes to economic development

A well-planned corporate tax strategy helps reduce liability while ensuring smooth compliance.

What is the ITR-6 Form?

ITR-6 is the income tax return form used by companies to report their income, profits, and tax details.

It applies to all companies except those claiming exemption under Section 11. The form includes details like:

Gross income and deductions
Depreciation and tax adjustments
Computation of total taxable income
Details of Minimum Alternate Tax (MAT) and carry-forward credits

Filing ITR-6 correctly ensures that your company stays compliant and avoids scrutiny or penalties.

What is Minimum Alternate Tax (MAT)?

Minimum Alternate Tax (MAT) ensures that companies that show large profits but pay little or no tax due to exemptions or deductions still contribute a minimum tax to the government.

Under Section 115JB, companies must pay MAT at a prescribed percentage (currently around 15%) of their book profit if their regular tax liability is lower.

It helps maintain fairness and prevents tax avoidance among corporates.

What is Alternate Minimum Tax (AMT)?

Alternate Minimum Tax (AMT) works similarly to MAT but applies mainly to non-corporate entities such as partnerships, LLPs, or individuals claiming certain tax benefits.

It ensures that even businesses enjoying tax incentives under specific sections of the Income Tax Act pay a minimum amount of tax.

Both MAT and AMT create a balanced tax system by maintaining equity between different business structures.

Capital Gains Tax: Understanding Short-Term and Long-Term Capital Gains

When a company sells an asset, property, or investment at a profit, it is liable to pay Capital Gains Tax.

Short-Term Capital Gains (STCG): Applies to assets held for a shorter period (usually less than 36 months).
Long-Term Capital Gains (LTCG): Applies to assets held for a longer duration. These gains often enjoy lower tax rates.

Capital gains tax helps regulate income from investments and ensures fair taxation across asset classes.

Dividend Distribution Tax (DDT)

Earlier, companies were required to pay Dividend Distribution Tax (DDT) before distributing dividends to shareholders.

However, since the Finance Act 2020, DDT has been abolished, and dividends are now taxed directly in the hands of shareholders based on their income tax slab.

This change simplified dividend taxation and removed the double-taxation burden on companies.

What is Section 115BAB of the Income Tax?

Section 115BAB offers a reduced corporate tax rate of 15% for new domestic manufacturing companies incorporated on or after 1st October 2019, and commencing production before 31st March 2024.

To avail of this benefit, companies must not claim any additional incentives or exemptions under other sections.

This section encourages Make in India initiatives by reducing the tax burden on new manufacturing entities.

Conclusion

Understanding corporate tax, its filing requirements, and related provisions like ITR-6, MAT, AMT, and Section 115BAB is crucial for every business.

By maintaining accurate financial records and timely filing, companies can stay compliant, reduce tax liabilities, and plan better for the future.

For accurate reports and easy tax compliance, use BUSY Accounting Software, designed to simplify corporate taxation, ITR preparation, and financial reporting for Indian businesses.