The Finance Bill 2022 proposes no changes to the tax rates for domestic companies for FY 2022-23/AY 2023-24. Accordingly, domestic companies will continue to pay the same tax rates as they did in fiscal year 2021-22 and fiscal year 2022-23.
As defined by the Income-tax Act, a domestic company is an Indian company or another company that has made the required arrangements to declare and pay dividends (including dividends on preference shares) within India from income subject to income-tax.
Tax rates proposed for domestic companies (FY2022-23/AY2023-24)
The same applies for FY 2021-22/AY 2022-23.
Domestic Income Tax Rates (FY2021-22/AY2022-23)
For FY 2021-22/ AY 2022-23, the Income Tax Rates for Domestic Companies/ Indian Companies were the same as those for FY 2020-21/ AY 2021-22, as per the Finance Act, 2020, i.e. no change from the previous year.
Fiscal Year 2020-21/Assessment Year 2021-22 Tax Rates for Domestic Companies
In FY 2020-21/AY 2021-22, the income tax rates for domestic companies/ Indian companies, according to Finance Act 2020, are 25% for turnovers up to Rs. 400 crore, and 30% for turnovers above Rs. 400 crore, with concessions for companies covered under Sections 115BA, 115BAA, and 115BAB:
The following categories and conditions apply to differential tax rates:Income Tax RateIf turnover or gross receipts of a domestic company do not exceed Rs. 400 crores in the previous financial year*25%Domestic firms covered u/s 115BA25%Domestic firms covered u/s 115BAA22%Domestic firms covered u/s 115BAB15%In the case of all other domestic firms 30%
Domestic companies are also subject to Surcharge, Health & Education Cess (HEC) and Minimum Alternate Tax (MAT), as follows:
Upon calculating the income tax liability (including u/s 111A, 112 or 112A), a domestic company will be liable for a surcharge of 7% if the income exceeds Rs. 1 crore but is up to Rs. 10 crore and 12% if the income exceeds Rs. 10 crore. Companies covered by sections 115BAA and 115BAB, however, shall be subject to a surcharge of 10%. Surcharge amounts are subject to marginal relief provisions, if applicable.
In all cases, the aggregate amount of Income Tax and Surcharge shall be subject to Health & Education Cess (HEC) at 4%.
In cases where the normal tax liability of the Domestic Company is less than 15% of book profits, the Minimum Alternate Tax (MAT) is applicable at 15% of book profits, except in the case of companies covered by Section 115BA. In addition, the surcharge and the Health and Education Cess will be applied.
Companies that are units of IFSCs and derive their income solely from convertible foreign exchange are subject to MAT rates of 9% (CFE).
Companies opting for concessional tax rates u/s 115BAA and 115BAB are exempt from MAT, however, they are not eligible to claim certain deductions u/s 80IA, 80IAB, 80IAC, 80IB, etc., except u/s 80JJAA and 80M.
* In FY 2020-21/AY 2021-22: total turnover or gross receipts in FY 2017-18
* FY 2021-22/AY 2022-23: total turnover or gross receipts for FY 2018-19
* For FY 2022-23/AY 2023-24: total turnover or gross receipts in FY 2019-20