Corporate Tax: Meaning, Filing Requirements, and Key Benefits for Businesses

Corporate tax is one of the most important aspects of business finance and compliance. Understanding it helps companies not only remain legally sound but also optimize their financial strategy. This guide covers the meaning, filing process, rates, and major benefits of corporate tax for businesses in India.

Book A Demo

Phone Number*

Country code

Email ID*

City*

Corporate Income Tax

What is Corporate Tax?

Every registered company earning profits in India must pay tax to the government. But what exactly counts as corporate tax, and how does it differ from other forms of taxation? Let’s explore the basics first.

Definition and Importance of Corporate Tax

Corporate tax is a direct tax imposed on a company’s profits. As a separate legal entity, a company is taxed independently from its shareholders. This tax contributes significantly to government revenue, funding infrastructure, welfare schemes, and economic initiatives. For businesses, correct computation and payment of corporate tax demonstrate financial transparency and compliance.

How Corporate Tax Differs from Income Tax

While income tax applies to individuals, corporate tax applies only to business entities. Companies are required to file ITR-6, verified through a Digital Signature Certificate (DSC). The tax slabs, surcharges, and deductions differ entirely from personal taxation systems.

Income Considered for Corporate Tax

Not all earnings are treated equally under corporate tax. Certain income types, such as profits, capital gains , and some exemptions, fall under specific tax treatments. Understanding this categorization ensures accurate tax calculation.

Business Profits

Business profits form the core of taxable income for companies. It starts with net profit as per books and is adjusted for allowable and disallowed expenses. Companies not under the concessional regime may fall under Minimum Alternate Tax (MAT) at 15% of book profit if their regular tax liability is lower.

Capital Gains and Other Sources

Apart from business profits, companies are taxed on income from capital gains, interest, royalties, or fees for technical services. The tax treatment depends on the source and duration of holding the asset.

Exemptions and Deductions

Under the older regime, certain sectors like infrastructure, power, or exports enjoyed tax deductions. However, companies opting for concessional tax regimes (22% or 15%) must forgo most exemptions. Hence, businesses must calculate whether lower rates or available deductions benefit them more.

Corporate Tax Rates in India – 2025 Update

India’s corporate tax rates have evolved to encourage investment and simplify compliance. As of 2025, companies can choose between old or new concessional regimes depending on their financial setup and goals.

Domestic Companies

Section 115BAA (Concessional Regime): 22% base tax, plus 10% surcharge and 4% cess. Companies must opt out of most exemptions to avail this.
Section 115BAB (New Manufacturing Units): 15% base tax for new manufacturing and power generation units, plus 10% surcharge and 4% cess.
Old Regime: 25% or 30% tax depending on turnover, plus surcharge and cess, with the benefit of exemptions and deductions.
MAT (Minimum Alternate Tax): 15% of book profit, applicable to companies under the old regime, but not to those opting for 115BAA/115BAB.

Foreign Companies

Foreign companies earning in India are taxed at a base rate of 35%, plus surcharge (2% or 5%) and 4% cess. However, rates on royalties or technical fees may vary based on treaties between India and the home country.

Surcharge and Cess

All taxes are further increased by a Health and Education Cess (4%) on the tax plus surcharge. Surcharge rates vary depending on income thresholds and tax regimes.

Corporate Tax Filing Requirements

Corporate tax filing ensures that a company’s financial performance aligns with its tax obligations. With digital systems, the process has become faster and more transparent.

Documents Required for Filing

Key documents include audited financial statements (balance sheet, profit & loss account), tax audit report, Form 26AS, AIS/TIS, and other supporting schedules. These ensure accurate disclosure and smooth assessments.

Filing Procedure and Deadlines

Prepare ITR-6 using the online or offline utility.
Upload the return through the Income Tax e-Filing portal.
Verify it using a Digital Signature Certificate (DSC).
The due date for audited companies is 31st October of the assessment year. Filing late can attract penalties or loss of carry-forward benefits.

Role of Digital Platforms in Corporate Tax Filing

The e-Filing portal has made tax submission seamless. Features like auto-prefilled data, real-time validation, and instant acknowledgment reduce manual errors and speed up the compliance process.

Key Benefits of Corporate Tax for Businesses

Corporate tax is not just a liability it brings structural advantages to businesses and the economy. Paying tax on time fosters credibility, improves access to credit, and aligns companies with national growth objectives.

Contribution to Economic Growth

Corporate tax contributes to the government’s revenue pool, funding public projects, infrastructure, and welfare schemes. This cycle of reinvestment promotes business growth by improving overall market conditions.

Tax Incentives and Reliefs

The 22% and 15% concessional tax regimes lower the effective tax burden, especially for companies reinvesting profits in manufacturing or expansion. Lower rates mean higher retained earnings and better global competitiveness.

Enhancing Business Credibility

Consistent tax compliance enhances a company’s reputation. It reflects financial discipline and improves credibility with investors, banks, and regulators. This often results in smoother audits and faster loan approvals.

Choosing the Right Regime: Old vs. Concessional

Selecting the correct tax regime is a strategic decision. The old regime provides multiple deductions but higher tax rates. The new concessional regimes simplify calculations and reduce the rate but disallow most exemptions.

Companies should perform a comparative analysis of both options every year, evaluating effective tax outgo. If deductions are limited, the concessional regime is generally more beneficial; if substantial deductions apply, the old regime might be preferred.

Conclusion

Corporate tax is more than a compliance requirement it’s a strategic element of financial planning. Understanding tax structures, exemptions, and filing procedures helps companies minimize costs, avoid penalties, and build long-term credibility.

As of 2025, India’s corporate tax system offers flexibility with multiple regimes, concessional rates, and robust online filing options. Timely filing of ITR-6, accurate documentation, and choosing the right tax route can help businesses save money while staying fully compliant.

Mohammad Abid Khan

Chartered Accountant

MRN No.: 468413

City: Varanasi

I’m CA Mohammad Abid Khan, a Chartered Accountant based in Varanasi with 10 years of experience. I specialize in GST and Income Tax, helping individuals and businesses stay compliant and optimize their taxes. I hold B.Com and M.Com degrees and enjoy simplifying finance through practical, easy-to-understand content.

Frequently Asked Questions

What is corporate tax and who pays it?

Corporate tax is a direct tax on company profits. Both domestic and foreign companies earning income in India must pay it and file ITR-6.
What is the current corporate tax rate in India?

Domestic companies can choose between 22% or 15% concessional rates or stick with older slabs of 25% or 30%. Foreign companies generally pay around 35% plus surcharge and cess.
How do companies file corporate tax returns?

Companies must file ITR-6 electronically via the Income-tax e-Filing portal, verified with a Digital Signature Certificate (DSC).
Are there any exemptions under corporate tax?

Yes, exemptions exist under the old regime. However, under concessional regimes, most exemptions and deductions are not allowed.
What are the penalties for late filing?

Late filing may attract interest, penalties, or disqualification from certain deductions. Filing before the due date helps avoid these issues.

View all FAQs