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Presentation of India : Taxation

Goods and Services Tax
Goods and services can be subject to six different rates: 0.25% or 3% (diamonds and other precious stones, gold, silver), 5% (branded cereals, air transport of passengers in economy class, restaurants, construction services of residential apartment), 12% or 18% (electrical apparatus for radio and television broadcasting, accommodation in hotels where value of supply is greater than INR1,000 per unit per day, intellectual property rights, construction services other than residential apartments, banking services), and 28% (motor cars, air-conditioners, aerated drinks, access to race clubs and casinos).
Company Tax :
Corporate tax rate: Domestic companies and partnerships: 30%

The effective tax (including surcharge and health and education cess) can range from 31.20% (income below INR 10 million); 33.38% (income between INR 10 and 100 million); and 34.94% (income over INR 100 million)
: Foreign companies (and branches): 40%

The effective tax (including surcharge and health and education cess) can range from 41.6% (income below INR 10 million); 42.43% (income between INR 10 and 100 million); and 43.68% (income over INR 100 million)
Surcharge: Domestic companies at 7% if income above INR 10 million and 12% if income above INR 100 million; Foreign companies at 2% and 5%, respectively
Health and Education Cess: 4% (included in the effective tax rates)
Reduced rate for existing companies
(for companies that will not avail any incentive or exemptions): 22% (plus surcharge of 10% and applicable health and education cess of 4%)
Reduced rate for newly set-up domestic manufacturing companies and companies engaged in generation of electricity (subject to conditions): 15% (plus surcharge of 10% and applicable health and education cess of 4%)
Minimum Alternative Tax (MAT): Applicable at a rate of 15% (plus any applicable surcharge and cess) on the adjusted book profits of companies whose tax liability is less than 15% of their book profits. Any applicable surcharge and cess must be added.

For local companies, the effective tax can range from 15.6% (income below INR 10 million); 16.692% (income between INR 10 and 100 million); and 17.472% (income over INR 100 million).

Withholding Taxes :
Dividend: 10% when paid to a resident corporation/individual (7.5% between 14 May 2020 and 31 March 2021)/20% when paid to a non-resident corporation/individual (10% for dividends paid on foreign currency bonds or global depository receipts), plus surcharge and chess.

Interest: 10% when paid to a resident corporation/individual (7.5% between 14 May 2020 and 31 March 2021)/20% when paid to a non-resident corporation/individual. If the interest income derived by a non-resident does not fulfil the conditions prescribed by the law for concessional WHT rates, a rate of 30% (for individuals and entities other than a foreign company) or 40% (for a foreign company), plus the applicable surcharge and cess, will apply.

Royalties: 2% where the royalty is paid to a resident corporation/individual and is in the nature of consideration for the sale, distribution, or exhibition of cinematographic films; otherwise, the rate is 10% (1.5% and 7.5%, respectively, between 14 May 2020 and 31 March 2021)/ 10% when paid to a non-resident corporation/individual, plus surcharge and chess.

The rates may be reduced under a tax treaty.

Social Security Contributions Paid By Employers :
The Employees' Provident Fund (EPF) Scheme is funded by the employer at 3.67% of monthly salaries (plus 0.5% of monthly salaries for administrative costs). 8.33% of the salary is compulsorily contributed to the pension scheme. If the monthly salary of employees exceeds INR 15,000, this contribution is allocated to the pension fund. Finally, the employer must contribute to Employer Liability with an average of 4% of the monthly payroll.
Other Domestic Resources
Income Tax Department
Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.
 

Country Comparison For Corporate Taxation

  India South Asia United States Germany
Number of Payments of Taxes per Year 10.9 26.7 10.6 9.0
Time Taken For Administrative Formalities (Hours) 251.9 273.5 175.0 218.0
Total Share of Taxes (% of Profit) 49.7 43.9 36.6 48.8

Source: Doing Business - Latest available data.

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Latest Update: June 2022