What is Corporation Tax, Types & Domestic & Foreign Rebates?

Corporate Tax-

Company tax/ Corporation tax are other names of corporate tax. On the income of the analogous legal entities or capital corporations, the direct tax is imposed on it by jurisdiction. These taxes are imposed on many countries at the national level. Even they have imposed at the local and state levels also.

The tax on the revenues after the deductions as depreciation, Cost of goods sold, and selling general and administrative expenses of the company which has taken into account. As the tax is levied on the income of the business, company tax can also be termed as income tax. Income tax is different for different countries depending on their rules.

What is Corporation Tax?

Corporate is termed as an individual having an independent or separate legal entity from its shareholders. The income is separately assessed and computed earned by the company from the dividends and then it will be offered to its shareholders. Under the tax calculation, these dividends will not be taken but these will be taken as the income of the shareholder.

In India, tax calculations by the companies are divided into two categories. Below are those two categories.

Foreign Category and Domestic Category.

Foreign Category-

The company whose management and control of affairs are from outside India, and which is not of Indian origin comes under this foreign category.

Domestic tax-

A Company which is Indian or even if it is a foreign company and if it is under the management and control system is in India then also we can say it as a Domestic Company. These companies are registered under companies Act1956.

For the annual year of 2019-2020 Corporate tax rates are as follows-

For Domestic Companies-

       Income Range        Tax rate
Gross turnover exceeding 250 crore      30%
Gross turnover up to 250 crore    25%

 

As per the above rates surcharge rates are as follows-

   Tax rates of domestic companies               Particulars
                     7%  If the income rate is between 1-10 crore.
                    12% If income exceeds Rs.10 Crore

 

For foreign countries tax rates are as follows for the Annual year of 2019-2020

        Income Nature      Tax rate
Under the agreement, the fees received from the government  

50%

 Other incomes            40%

 

Depending on other rates surcharge rates as follows-

 Particulars    Tax rates of foreign companies
 If the income rate is between 1-10 crore                      2%
If income ranges above 10 crore                      5%

MAT Minimum Alternate Tax-

For both the foreign and domestic companies the minimum tax rate. The tax rates which are calculated with the given rates which are less than or above 18.5% of the book profits are on the actual book profits.

Tax on Education and Health-

Before calculating the education and health tax, the total taxability amount, incomes 4% tax, applicable surcharges will be added first.

Dividend Distribution Tax

On the distributed dividends tax paid to the shareholders each year.  The dividend can be increased up to Rs.10 Lakhs as per shareholders. 20.56% is the tax paid by the companies.

MAT Minimum Alternate Tax Liability-

The company has to pay the Minimum Alternative Tax MAT as token tax money if the payable tax of the company is less than 18.5% of the income profit as per their records. Anyhow this MAT can be carried forward up to ten years.

What do you mean by the companies income?

Everyone has to learn about the company’s income to know how to calculate the corporate tax. The income of the companies is as the following rules-

  • Properties income
  • Capital gains
  • Business profits
  • Interests, foreign dividends are also other income sources.

Tax rebates-

Many tax rebates are applicable to the companies apart from other types of taxes charged on the companies. Here are some of the rebates below here.

  • Dividends that are received from the other companies can be deducted in some cases.
  • For new undertakings and exports, deductions are accepted in some cases.
  • To the venture capital enterprises and venture funds special funds, are charged.
  • Capital gains, dividends, and interest can also be deducted in some cases.
  • Provision can be carried forward over 8 years in case of any business loss.
  • Power sources and new infrastructure can set-up to some deductions.

Planning Corporate tax-

The planning of the tax can be done in business with the strategy of business affairs financially with a plan of minimizing the payable tax and maximizing the profits. This can be allowed with the benefits of exemptions, rebates, and deductions. To handle the tax process, the management about tax is tricky even it is also risky for corporates who have a large amount of money. Tax planning should be healthy and it can be done if we have awareness about all the laws on taxes and corresponding rules and regulations.  Tax evasion is different from the planning of corporate tax.