Company Tax Rate in India for FY 2025-2026

Understanding the Company tax rate is essential for business purposes. It helps in financial planning and long-term business growth. In other words, it is known as a corporate tax rate. This percentage takes money from a company's profits. This shows how much money businesses keep after paying their costs and employee salaries. It also accounts for any loss in value of their assets. So, every business must know the tax ranges and effective rates. In this blog, you will learn about the latest company tax rates and more.

What is the Company Tax Rate?

A company tax rate refers to the percentage of net profit. Corporations need to pay it to the government. It is also known as the corporate tax rate. This applies to both domestic and foreign corporations on their earnings. In other words, we can say that it is a direct tax calculated on taxable income. This is the money earned minus allowed costs. It includes:

a) Expenses for running the business

b) Salaries

c) Depreciation

Breakdown of a Current Company Tax Rate

In the Assessment Year (AY) 2026-27 (Financial Year 2025-26), the company tax rates are 25% or 30%. This is for domestic companies in India. It is applicable in case of the total turnover or gross receipts in the previous year 2023-24 is not more than Rs. 400 crore. Concessional rates of 22% (Section 115BAA) or 5% (Section 115BAB) applicable to eligible companies. In the case of foreign companies, it attracts a 35% rate.

Here is a detailed breakdown of the corporate tax rates:

1) Standard Rates for Domestic Company

a) 25%

A 25% rate suits companies with a total turnover or gross receipt is not more than Rs. 400 crore. This applies to companies in the previous year of FY 2023-24.

b) 30%

This rate is applicable for companies that had a turnover of more than Rs. 400 crore in the previous year (FY 2023-24).

2) Concessional Tax Regimes (No deductions allowed)

It includes:

a) Section 115BAA (22%)

This section is suitable for existing domestic companies that opt for this regime.

b) Section 115BAB (15%)

This is applicable for new domestic manufacturing companies that started on or after October 1, 2019.

c) Foreign Companies

A foreign companies has a rate of 35% on total income.

3) Surcharge Rates (Based on Total Income)

This means:

a) Income which is more than Rs. 1 crore and less than or equal to Rs. 10 crore

It mainly attracts a 7% income tax (10% if 115BAA/115BAB is chosen).

b) Income greater than Rs. 10 Crore

This applies to a 12% income tax rate (10% if 115BAA/115BAB is chosen).

4) Health and Education Cess

A 4% rate of the total of income tax and surcharge.

5) Minimum Alternate Tax (MAT)

This can include 15% rate of book profit (plus surcharge/cess). 9% rate is suitable for units in the International Financial Services Centre (IFSC).

Comparative Table of Company Tax Rates for AY 2025-26

Here is the table that outlines the comparative company tax rates:

How to Calculate a Company Tax Rate?

Listed below are the steps to calculate the company tax rate:

Step 1: Determine Net Taxable Income

You need to calculate the profit. You can do it by subtracting allowed costs, depreciation, and deductions from total income.

Step 2: Select Tax Regime

This step allows you to select the tax regime. This includes:

a) Normal Regime

25% (if turnover is less than or equal to Rs. 400 crore in FY 2023-24. A 30% rate applies if turnover is more than Rs. 400 crore.

b) Section 115BAA

22% (if no exemptions/incentives are claimed).

c) Section 115BAB

15% rate (for new domestic manufacturing companies incorporated after Oct 1, 2019).

Step 3: Calculate Base Tax

In this step, you need to calculate the base tax. So, you must multiply Net Taxable Income by the chosen rate

Step 4: Add Surcharge

This step allows you to add a surcharge. So:

a) Income > ?1 crore to ?10 crore: 7% of base tax.

b) Income > ?10 crore: 12% of base tax.

c) Note for 115BAA/115BAB: Surcharge is fixed at 10% regardless of income.

Step 5: Add Health and Education Cess:

You must add 4% on the total of (Base Tax + Surcharge). This will allow you to add Health and Education cess.

Step 6: Apply Minimum Alternate Tax (MAT)

A 15% tax (9% for IFSC units) will be used if it is lower than the normal tax. This does not apply to companies choosing the 115BAA/115BAB option.

Key Deductions and Exemptions to Lower Company Tax Rate

Consequently, to take advantage of the low tax rates (15% or 22% + surcharge/cess), companies have to choose the concessional tax regimes. This offers limited deductions. Here are the key deductions:

a) Additional Employee Cost (Section 80JJAA)

As per this section, 30% of the additional cost for three years will be deducted for new employees.

b) Depreciation (Section 32)

Normal depreciation under the Income Tax Act is generally. The allowance of accelerated depreciation under the lower tax regimes is restricted.

c) Startup Incentives (Section 80-IAC)

It gives tax holidays for startups. This is suitable for startups when they fulfil particular criteria.

d) Interest on Debt (Section 24/Business Expense)

Interest on loans used for business is allowed as a deduction.

e) Corporate Social Responsibility (CSR)

CSR expenditure qualifying under Section 135 of the Companies Act may be deducted from the income. However, it is not a direct reduction of the corporate rate.

Key Reduced Rate Regimes (FY 2025-26)

Here are the key reduced rate regimes:

a) Section 115BAB (New Manufacturing)

Domestic manufacturing companies that were set up after October 1, 2019, have to pay a 15% tax rate. Manufacturing must commence on or before 31 March 2024 (as per current law). There has been no extension to 2026 as of now.

b) Section 115BAA (Existing Companies)

Section 115BAA applies to existing companies with 22% rate for any domestic company. No deductions are allowable under Chapter VI-A (except 80JJAA) or accelerated depreciation.

Due Date and Compliance of a Company Tax Rate

In India, companies must file their income tax returns for the year. Transfer pricing cases have a deadline of November 30. They also need to pay advance tax every quarter on June 15, September 15, December 15, and March 15. Usually, domestic companies pay between 25% and 30% tax, along with additional charges depending on how much money they earn.

Conclusion

Knowing the company tax rate is an essential step to protect your business’s financial future. Understanding the proper tax rate helps to bring business growth. So, you must keep updated for your business purpose. It confirms that your business follow the law and stay competitive. A proper tax plan helps your business with a long-term success. If you need any assistance about it, contact Online Legal India.

FAQ

Q1. What is the Company tax rate for domestic companies in FY 2025-26?

A Company tax rate for domestic companies has a 30% rate. This is applicable for the financial year 2025-26. However, a reduced rate of 25% applies under Specific conditions. This applies if the total turnover or gross receipt of the company in the previous year (FY 2023-24) is not more than Rs. 400 crores.

Q2. Is there a lower tax regime (15% or 22%) available in 2025-26?
Yes, there is a lower tax regime (15% or 22%) available. So, companies can choose for concessional tax regimes:

1. 22% (Section 115BAA): This is suitable for existing domestic companies not claiming specific deductions.
2. 15% (Section 115BAB): This applies to new manufacturing domestic companies (incorporated after Oct 1, 2019).

Q3. What is the tax rate for foreign companies in India for 2025-26?

The tax rate for foreign companies in India is 35%. This applies to the Assessment Year 2026-27 (FY 2025-26).

Q4. Do new manufacturing companies get tax holidays?
No tax holiday, but a concessional 15% tax rate is available.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. Online Legal India is a digital platform. If you require legal assistance, we strongly recommend consulting a qualified lawyer or law firm.