Union Finance Minister has today reduced the Corporate Rate Tax for Financial Year 2017-18 (AY 2018-19) to 25% for companies whose turnover is less than 50 Crore in a year. Around 95% of companies India shall be benefited through this new amendment in Income Tax Rate.
Corporate tax is a form of tax levied on profits earned by businessmen in a particular period of time. Various rates of corporate taxes are levied for different levels of profits earned by business houses. Corporate tax is generally levied on the revenues of a company after deductions such as depreciation, COGS (Cost of goods sold) and SG&A (Selling general and administrative expenses) have been taken into account.
Corporate tax or company tax can be assumed as an income tax for income earned by businesses. Many countries levy corporate tax in order to smooth out the tax process for enterprises. Different countries have different rules that apply to taxing of income.
Corporate tax in India is levied on both domestic as well as foreign companies. Like all individuals earning income are supposed to pay a tax on their income, business houses too are supposed to pay as tax a certain portion of their income earned. This tax is known as corporate tax, corporation tax or company tax.
In order to compute corporate tax on the income of a company it is necessary to first learn what all factors make up the total income of any company.
- Profits from business
- Income from property
- Capital gains
- Income from other sources such as foreign dividends, interests etc.