Tax on Total Income of a Company under Income Tax Act, 1961

1. Basic Framework

• Companies are taxed on their total incomecomputed under the Income Tax Act, 1961.
• Tax rates vary based on:
  • Type of company (domestic/foreign)
  • Turnover/special categories (e.g., manufacturing)
  • Applicable tax regime (normal or concessional)

2. Computation of Total Income

Step 1: Calculate Gross Total Income

• Aggregate income under 5 heads:
  1. Profits/gains from business/profession
  2. Capital gains
  3. Income from house property
  4. Income from other sources
  5. Dividend income (taxable in shareholder’s hands post-2020)

Step 2: Allow Deductions (Chapter VI-A)

• Common deductions:
  • Section 80IA (infrastructure)
  • Section 80JJAA (employment generation)
  • Section 35 (R&D expenditure)

Step 3: Arrive at Taxable Income

• Gross Total Income – Allowable Deductions

3. Applicable Tax Rates (FY 2024-25)

Surcharge Rates:

• 7% if income > ₹1 crore
• 12% if income > ₹10 crore

Health & Education Cess: 4%

4. Minimum Alternate Tax (MAT)

• Rate:15% + SC + cess on book profits
• Applies when:Tax on total income < 15% of book profits
• Exemptions:Companies opting for 115BAA/115BAB regimes

5. Tax Payment & Compliance

• Advance Tax:Quarterly installments (June 15, Sept 15, Dec 15, March 15)
• Return Filing:
  • Normal cases: October 31
  • Audit cases: November 30
• Penalties:
  • Late filing: ₹5,000-₹10,000
  • Underreporting: 50-200% of tax evaded

6. Special Cases

• Startups:Tax holiday available (Section 80-IAC)
• SEZ Units:Deductions under Section 10AA
• Banking Companies:Special provisions under Section 36(1)(viii)

7. Recent Changes (2024)

• New tax regime made default (opt-out available)
• Reduced MAT rate from 18.5% to 15%
• Stricter transfer pricing documentation

Example Calculation:
A domestic company with ₹5 crore taxable income:

• Normal regime: 30% of ₹5 cr = ₹1.5 cr + 7% surcharge + 4% cess = ₹1,66,92,000
• Concessional regime: 22% of ₹5 cr = ₹1.1 cr + 7% + 4% = ₹1,22,54,000

Key Considerations:

1. Choose between normal/concessional regime carefully
2. MAT liability may apply even with losses
3. Foreign companies have higher base rate
4. Tax holidays can significantly reduce liability