For FY 2025-26 a domestic company can pay 22% under Section 115BAA (no incentives), which works out to an effective 25.17% after a flat 10% surcharge and 4% cess. Without opting for the concessional regime, the base rate is 25% if turnover in FY 2023-24 was up to Rs 400 crore and 30% otherwise, plus surcharge and cess. A new manufacturing company can pay 15% under Section 115BAB. Foreign companies are taxed at a 35% base rate (reduced from 40% by the Finance Act, 2024).
Section 115BAA (22%) removes MAT and gives certainty, so most profitable domestic companies opt in rather than claim scattered deductions under the 30% regime. Once you opt in, the choice is irreversible for all future years — so model it before filing Form 10-IC.
Corporate Tax Rates — All Company Types (FY 2025-26)
Base rate before surcharge and 4% health & education cess. Concessional regimes (115BAA / 115BAB) require the company to forgo most exemptions and file the prescribed option form.
| Company type / regime | Base rate | Surcharge | Effective rate* |
|---|---|---|---|
| Domestic — Sec 115BAA (no incentives) | 22% | 10% flat | 25.17% |
| Domestic — turnover ≤ Rs 400 cr (FY 2023-24) | 25% | 7% / 12% | ≈ 26–29% |
| Domestic — other companies | 30% | 7% / 12% | ≈ 31.2–34.9% |
| New manufacturing — Sec 115BAB | 15% | 10% flat | 17.16% |
| Foreign company | 35% | 2% / 5% | ≈ 36.4–38.2% |
* Effective rate includes surcharge and 4% cess; ranges depend on the income slab that decides the surcharge. Foreign-company base rate was cut from 40% to 35% by the Finance Act, 2024. Verify the current-year rate at incometax.gov.in.
Section 115BAA — 22% Without Incentives
Section 115BAA lets any domestic company pay tax at a flat 22% base rate provided it does not claim most deductions and exemptions — for example Section 10AA (SEZ), additional/accelerated depreciation and most Chapter VI-A deductions. Companies under 115BAA are outside MAT. The option is exercised in Form 10-IC and, once chosen, applies to all subsequent years.
Sec 115BAA — concessional
- Flat 22% base + 10% surcharge + 4% cess
- Effective 25.17% on all income levels
- No MAT under Section 115JB
- Most incentives & deductions forgone
- Irreversible once opted
Normal regime (30% / 25%)
- 25% if turnover ≤ Rs 400 cr, else 30%
- Surcharge 7% (>Rs 1 cr) / 12% (>Rs 10 cr)
- MAT at 15% of book profit still applies
- Can claim eligible deductions
- Useful if you have large deductions / losses
From 22% to the Effective 25.17%
The headline rate is only the base. Surcharge is charged on the tax, and cess is charged on tax plus surcharge. Here is the build-up for a Section 115BAA company and for a 30% company crossing the Rs 10 crore surcharge threshold.
115BAA · profit Rs 10 cr
30% · profit > Rs 10 cr
Domestic-company surcharge is 7% on income above Rs 1 crore and 12% above Rs 10 crore in the normal regime, but a flat 10% under 115BAA / 115BAB. Cess is 4% on tax plus surcharge in every case. See our surcharge guide for the full picture.
The 22% / 25% / 30% company rates are separate from the individual new-vs-old slab regime. A company cannot claim Section 80C, the Rs 12.75 lakh salaried rebate or the individual standard deduction — those belong to individual taxpayers, not companies, firms or LLPs.
Not sure whether 115BAA or the 30% regime is cheaper for you?
Talk to a Tax Expert →MAT — Minimum Alternate Tax on Book Profit
MAT under Section 115JB makes companies with large book profits but low taxable income still pay a floor tax. MAT is 15% of book profit (as per the Companies Act profit & loss account) plus surcharge and cess. If regular tax is less than MAT, the company pays MAT and the excess becomes MAT credit, carried forward for up to 15 years.
| Scenario | MAT applies? | Reason |
|---|---|---|
| Company under Section 115BAA (22%) | No | 115BAA companies are excluded from MAT |
| New manufacturing under 115BAB (15%) | No | 115BAB companies are excluded from MAT |
| Domestic company under normal 30% / 25% regime | Yes | MAT floor of 15% of book profit applies |
| Company claiming SEZ / large deductions | Yes | MAT designed for exactly this situation |
MAT credit can be set off in a later year when regular tax exceeds MAT. Verify the current MAT rate and carry-forward period at incometax.gov.in.
How a Company Computes and Pays Its Tax
- 1Compute incomeBusiness income after allowable expenses
- 2Pick the regime115BAA / 115BAB via Form 10-IC / 10-ID, or normal
- 3Apply rate + surcharge + cessAnd compare with MAT if in normal regime
- 4Pay advance tax15/45/75/100% by 15 Jun/Sep/Dec/Mar
- 5File ITR-6With tax audit report where applicable
- Regime option form (10-IC / 10-ID) filed in time
- Advance tax paid across the four instalments
- Tax-audit report where turnover crosses the limit
- Book profit computed for MAT (normal regime)
- MAT credit tracked for carry-forward
- TDS on payments deducted and deposited
- ITR-6 filed by the due date
The 115BAA / 115BAB option is valid only if the prescribed form is filed on or before the return due date for the first year of opting. Missing it can push the company back to the 30% regime with MAT for that year — a costly, avoidable slip.
Want your company tax computed, optimised and filed correctly?
Get Company Tax Help →- Company tax rates: incometax.gov.in
- Concessional regimes: Sections 115BAA & 115BAB, Income-tax Act 1961
- MAT: Section 115JB, Income-tax Act 1961
- Foreign-company rate cut to 35%: Finance Act, 2024
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.