Income Tax Slab for Companies FY 2025-26 — Corporate Tax Rates
Updated: 3 June 2026 · Income-tax Act 2025 · FY 2025-26 / AY 2026-27
Corporate Tax Rates at a Glance — FY 2025-26
| Company Type / Regime | Base Tax Rate | Surcharge | Effective Rate (incl. 4% cess) |
|---|---|---|---|
| Domestic — turnover > ₹400 crore (normal) | 30% | 7% (₹1–10Cr income) / 12% (>₹10Cr) | 33.38% / 34.94% |
| Domestic — turnover ≤ ₹400 crore (normal) | 25% | 7% (₹1–10Cr) / 12% (>₹10Cr) | 27.82% / 29.12% |
| Domestic — Section 115BAA (concessional) | 22% | 10% (flat) | 25.17% |
| New manufacturing — Section 115BAB | 15% | 10% (flat) | 17.01% |
| Foreign company | 40% | 2% (₹1–10Cr) / 5% (>₹10Cr) | 43.68% / 44.00% |
| Foreign company (royalty / FTS under DTAA) | 10% | 2% / 5% | Varies |
Normal Tax Regime — 30% and 25% Base Rates
Under the standard provisions of the Income-tax Act, domestic companies are taxed at:
- 25% — if the company's total turnover or gross receipts in the previous financial year did not exceed ₹400 crore. The turnover threshold was raised from ₹250 crore to ₹400 crore by the Finance Act 2020.
- 30% — for all other domestic companies with turnover exceeding ₹400 crore
These companies are also subject to MAT at 15% of book profit if MAT exceeds normal tax liability. Surcharge is levied at 7% if income is between ₹1 crore and ₹10 crore, and 12% if income exceeds ₹10 crore.
Section 115BAA — 22% Flat Rate for All Domestic Companies
Introduced by the Taxation Laws (Amendment) Act 2019, Section 115BAA allows any domestic company to opt for a flat 22% tax rate without MAT. Key features:
- Flat 10% surcharge (regardless of income level) + 4% cess = effective 25.17%
- No Minimum Alternate Tax (MAT) under Section 115JB
- No turnover limit — any domestic company of any size can opt in
- Must give up specified deductions and exemptions (80IC, 80IE, 80-IBA, 80JJA, 10AA, etc.)
- Cannot set off brought-forward losses attributable to the above exemptions
- Option exercised in Form 10-IC; once opted in, cannot be withdrawn
For most companies, 115BAA is beneficial if their effective tax rate under the normal regime (after deductions) is above ~25.17%. Companies with significant 80C/80IC deductions may find the normal regime more tax-efficient.
Section 115BAB — 15% Rate for New Manufacturing Companies
Section 115BAB was introduced to attract new manufacturing investment. Conditions:
- Domestic company incorporated on or after 1 October 2019
- Commences manufacturing or production of an article/thing on or before 31 March 2027
- Not formed by splitting/reconstruction of an existing business
- Does not use plant/machinery previously used for any purpose in India (with minor exceptions)
- Is not engaged in development of software, infrastructure/real estate, or financial services
Effective rate: 15% base + 10% surcharge (flat) + 4% cess = 17.01%. Like 115BAA, there is no MAT under this regime. The company must also not claim deductions under Chapters VI-A (other than Section 80JJAA for new employees) or Section 10AA.
MAT — Minimum Alternate Tax
MAT under Section 115JB applies to all domestic companies except those operating under the 115BAA or 115BAB concessional regimes. If a company's tax under normal provisions is lower than 15% of its book profit (per P&L under Companies Act), it must pay MAT at 15% of book profit plus surcharge and cess.
The excess MAT paid over normal tax becomes MAT Credit under Section 115JAA, which can be carried forward for up to 15 years and set off against normal tax when it exceeds MAT in subsequent years. MAT credit cannot be carried forward if the company later opts for 115BAA.
Surcharge on Corporate Tax
| Income Range | Normal Regime | 115BAA / 115BAB | Foreign Company |
|---|---|---|---|
| Up to ₹1 crore | Nil | 10% | Nil |
| ₹1 crore to ₹10 crore | 7% | 10% | 2% |
| Above ₹10 crore | 12% | 10% | 5% |
Surcharge under the concessional regimes (115BAA/BAB) is a flat 10% regardless of income level — this simplifies computation and eliminates marginal relief considerations for these companies.
Foreign Companies — 40% Base Rate
Foreign companies (incorporated outside India) are taxed at a flat 40% base rate on income received from or accruing in India. Surcharge is 2% for income between ₹1–10 crore and 5% for income above ₹10 crore, plus 4% cess. Specific types of income like royalties and fees for technical services (FTS) under a DTAA may be taxed at lower rates (10% or as per treaty).
Foreign companies do not have a separate turnover-based lower rate equivalent to the 25% rate for domestic companies. DTAA provisions take precedence over domestic tax rates where beneficial to the foreign company.
Dividend Taxation After DDT Abolition
The Dividend Distribution Tax was abolished from FY 2020-21. Prior to that, domestic companies paid DDT at an effective rate of ~20.56%, and shareholders received dividends tax-free. Now:
- Dividends are taxable in the shareholder's hands at their applicable slab rate
- Companies deduct TDS at 10% under Section 194 if dividends exceed ₹5,000 per shareholder per year
- Domestic companies receiving dividends from other domestic companies can claim Section 80M deduction (to avoid cascading) for the amount passed on as dividend to their own shareholders
- Foreign companies receiving dividends from Indian companies are taxed at 20% under Section 115A (or as per DTAA, whichever is beneficial)
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