A corporation is resident in India, if it is incorporated in India or has its registered office in India, or its place of effective management is in India
Tax base
Worldwide
Corporate tax rates
30% general corporate tax rate (effective tax rate is higher after taking into account surcharge and cess)
25% if turnover is less than INR 500 million in FY2015-16 (applicable for assessment year 2018/19)
25% if turnover is less than INR 2.5 billion in FY2016/17 (applicable from assessment year 2019/20)
25% for qualified manufacturing/research companies
10% if patent is developed and registered in India
Surcharge (SC) of 7% where total income exceeds INR 10 million and 12% where total income exceeds INR 100 million (surcharge is 5% and 10% respectively prior to assessment year 2016/17)
2% education cess (EC) and 1% secondary and higher education cess (SHEC) levied on income tax payable (discontinued from 1 April 2018)
4% health and education cess (HEC) levied on income tax payable (effective from 1 April 2018)
Alternative minimum tax
Yes, alternative minimum tax of 18.5% plus applicable surcharge and cess is imposed on the adjusted book profits of corporations whose tax liability is less than 18.5% of their book profits
Capital gains
Part of business income or specific regime depending on nature of taxpayer’s business
Loss carry-forward
8 years, subject to ownership continuity test
Loss carry-back
No
Unilateral double taxation relief
Yes
2. Non-resident companies
Corporate tax rates
40% (effective tax rate is higher after taking into account surcharge and cess)
Surcharge (SC) of 2% where total income exceeds INR 10 million, and 5% where total income exceeds INR 100 million
2% education cess (EC) and 1% secondary and higher education cess (SHEC) levied on income tax payable (discontinued from 1 April 2018)
4% health and education cess (HEC) levied on income tax payable (effective from 1 April 2018)
Capital gains on sale of shares in resident companies
Yes
Capital gains on sale of immovable property
Specific regime; lower tax rates apply
Withholding tax rates
Branch profits
No
Dividends
No (a final dividend distribution tax is payable by the dividend-paying company at 15% plus SC and HEC)
Interest
5% plus applicable SC and HEC for interest on long-term loans/bonds
10% plus applicable SC and HEC for foreign currency convertible bonds
20% plus SC and HEC for others
Royalties
10% plus applicable SC and HEC
Fees (technical)
10% plus applicable SC and HEC
Fees (management)
10% plus applicable SC and HEC
3. Specific issues
Participation relief
Inbound dividends: no (benefit of concessional rate of 15% available, if 26% plus shareholding)
Outbound dividends: no (benefit of adjustments with taxes paid on inbound dividends (dividend distribution tax) available, if 50% plus shareholding)
Group treatment
No
Incentives
Research companies
Mineral oil production
Cold chain facilities
Shipping and air transportation
Hotels
Hospitals
Power sector
Manufacturing sector
Anti-avoidance
Transfer pricing legislation
Yes
Thin capitalization legislation
No (but interest deduction is limited in certain cases)
Controlled foreign company legislation
No
General anti-avoidance rule (GAAR)
Yes
Other anti-avoidance legislation
Yes
B. Direct taxation: Individuals
1. Resident individuals
Residence
Based on the number of days present in India in a tax year
Taxable income
Worldwide
Income tax rates
Progressive
Top rate 30% (on income over INR 1 million) (effective tax rate is higher after taking into account surcharge and cess)
Additional surcharge of 10% applicable on tax payable where total income exceeds INR 5 million but not INR 10 million. Additional surcharge of 15% applicable on tax payable where total income exceeds INR 10 million
2% education cess (EC) and 1% secondary and higher education cess (SHEC) levied on income tax payable (discontinued from 1 April 2018)
4% health and education cess (HEC) levied on income tax payable (effective from 1 April 2018)
Alternative minimum tax
Yes; however, AMT is not applicable to individuals if their adjusted total income does not exceed INR 2 million
Capital gains
Specific regime
Unilateral double taxation relief
Yes
Social security contributions
Various contributions with a complex rate structure
2. Non-resident individuals
Income tax rates
Progressive
Top rate 30% (on income over INR 1 million) (effective tax rate is higher after taking into account surcharge and cess)
Additional surcharge of 10% applicable on tax payable where total income exceeds INR 5 million but not INR 10 million. Additional surcharge of 15% applicable on tax payable where total income exceeds INR 10 million
2% EC and 1% SHEC levied on income tax payable (discontinued from 1 April 2018)
4% health and education cess (HEC) levied on income tax payable (effective from 1 April 2018)
Capital gains on sale of shares in resident companies
Yes
Capital gains on sale of immovable property
Specific regime; lower tax rates apply
Withholding tax rates
Employment income
Top rate 30% (on income over INR 1 million)
Dividends
No (a final dividend distribution tax is payable by the dividend-paying company at 15% plus SC and HEC)
Interest
5% plus applicable SC and HEC for interest on long-term loans/bonds
10% plus applicable SC and HEC for foreign currency convertible bonds
20% plus SC and HEC for others
Royalties
10% plus applicable SC and HEC
Fees (technical)
10% plus applicable SC and HEC
Fees (directors)
10% plus applicable SC and HEC
C. Indirect taxation: Value added tax (VAT)/Goods and services tax (GST)
Taxable events
As from 1 July 2017, GST is levied on supply of goods and services. For all intra-state supplies, Central GST and State GST (or Union Territory GST, as the case may be) is applicable, whereas for all inter-state supplies (including imports), Integrated GST applies
VAT/GST (standard)
12% and 18%
VAT/GST (reduced)
0% and 5%
VAT/GST (increased)
28% + varied Cess
Registration/deregistration threshold
INR 2 million in general
INR 1 million in specified north-eastern states
VAT group
No
D. Other taxes
Inheritance and gift taxes
No
Net wealth tax (individual)
No (abolished from 1 April 2015)
Net wealth tax (corporate)
No (abolished from 1 April 2015)
Real estate taxes
Corporations: no
Individuals: yes (rates vary among the states)
Capital duty
No
Transfer tax
Yes (local tax on immovable property, securities transaction tax on shares and other securities)
Stamp duty
Yes
Excise duties
No (subsumed in GST)
Other main taxes
Dividend distribution tax
Distribution tax on buyback
Equalization levy
E. General information
Sources of tax law
Income Tax Act
Central GST Act
Integrated GST Act
State GST Act
Union Territory GST Act
Main types of business entities
Company
Limited liability partnerships
Partnership
Cooperative
Joint Hindu Family
Sole proprietorship
Representative office
Branch of a foreign corporation
Accounting principles
Accounting Standards issued by the Institute of Chartered Accountants of India (largely based on IAS)
For computation of taxable income, Income Computation and Disclosure Standards issued by the Central Board of Direct Taxes
Currency
Indian rupee (INR)
Foreign exchange control
Yes, a simplified regulatory regime for foreign exchange transactions and liberalized capital account transactions
Current account transactions are permitted unless specifically prohibited
The Central Bank monitors capital account transactions
