Taxation Rates for Public Limited Companies

Introduction
Public Limited Companies in India are subject to corporate tax as per the Income Tax Act, 1961. These taxation rates are determined by factors such as the company’s annual turnover, type of income, and whether it has opted for special tax regimes under government incentives. In addition to corporate income tax, other levies such as surcharge, cess, and Minimum Alternate Tax (MAT) may also apply. Understanding the taxation structure is essential for financial planning and regulatory compliance. This article outlines the applicable taxation rates and related provisions for Public Limited Companies in India.

Basic Corporate Tax Rate
For domestic Public Limited Companies, the basic income tax rate is determined based on whether they avail of concessional tax schemes:

• 25% tax rate applies if the company’s gross turnover or gross receipts in the previous financial year does not exceed ₹400 crore.
  
• 30% tax rate applies to companies exceeding the ₹400 crore threshold and not opting for concessional regimes.
  

These rates are subject to additional levies like surcharge and cess.

Optional Concessional Tax Regimes
Under Section 115BAA and 115BAB of the Income Tax Act, companies can opt for concessional tax rates:

• Section 115BAA: Companies can pay tax at 22% (plus surcharge and cess) if they do not claim exemptions or deductions under certain provisions (e.g., additional depreciation, SEZ benefits).
  
• Section 115BAB: For new domestic manufacturing companies incorporated on or after October 1, 2019, the tax rate is 15% (plus surcharge and cess) if they commence production before March 31, 2024.
  

These options are irrevocable once chosen.

Surcharge on Income Tax
In addition to basic tax, companies are liable to pay a surcharge based on their taxable income:

• 7% surcharge if taxable income exceeds ₹1 crore but does not exceed ₹10 crore.
  
• 12% surcharge if taxable income exceeds ₹10 crore.
  

For companies opting under Sections 115BAA or 115BAB, a flat 10% surcharge applies regardless of income level.

Health and Education Cess
All companies are required to pay an additional 4% Health and Education Cess on the amount of income tax plus surcharge. This is uniformly applicable across all companies, regardless of their size or tax scheme.

Minimum Alternate Tax (MAT)
MAT is levied under Section 115JB to ensure companies with low or no taxable income (due to exemptions or deductions) still pay a minimum tax. The MAT rate is:

• 15% of book profit (plus applicable surcharge and cess).
  

However, companies opting for concessional tax regimes under Section 115BAA or 115BAB are exempt from MAT.

Dividend Distribution Tax (Abolished)
Earlier, companies had to pay Dividend Distribution Tax (DDT) on profits distributed as dividends. This tax was abolished from April 1, 2020, and now, dividends are taxable in the hands of shareholders at applicable slab rates. Companies must, however, deduct TDS (Tax Deducted at Source) before distributing dividends.

Taxation of Foreign Public Limited Companies
If a foreign public company earns income in India, it is taxed at:

• 40% on net income (plus surcharge and cess).
  
• Additional compliance requirements under Transfer Pricing and Withholding Tax rules apply to cross-border transactions.
  

Conclusion
Taxation for Public Limited Companies in India is governed by a structured set of rules offering both standard and concessional options. While the base tax rate ranges from 22% to 30%, companies must also account for surcharge, cess, and MAT. The introduction of lower tax regimes under Sections 115BAA and 115BAB provides companies with strategic choices to reduce tax liabilities, provided they forgo specific deductions. Staying informed of these rates and obligations is vital for compliance, tax planning, and optimizing corporate profitability.

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