India Corporate Tax - Guide for International Expansion

Are you considering expanding your business to India? Understanding corporate income tax is crucial for any company looking to establish operations in one of the world's fastest-growing economies.

This comprehensive guide covers everything you need to know about corporate taxation in India, from basic rates to compliance requirements. Whether you're a multinational corporation or a startup exploring new markets, grasping India's tax landscape is essential for successful business operations. With Wise Business, you can also streamline your international payments and manage your finances efficiently across borders.

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This publication is provided for general information purposes and does not constitute legal, tax, or other professional advice from Wise Payments Limited, its subsidiaries or affiliates, and it is not intended as a substitute for obtaining business advice from a tax advisor or any other professional.

India Corporate tax rate in 2025

Domestic Companies

For the financial year 2025, a domestic company's tax rate depends on whether it opts for the new or old tax regime.¹

• Old Tax Regime: Companies with a turnover of up to ₹400 crore (in FY 2022–23) are taxed at 25%, while others face a 30% rate.
• New Tax Regime (Optional): Introduced to simplify business, this regime offers lower rates without deductions. Under Section 115BAA, any domestic company can choose a 22% tax rate. For newly established manufacturing companies, Section 115BAB offers a reduced rate of 15%. Companies in this regime are exempt from Minimum Alternate Tax (MAT).

Foreign Companies

Foreign companies, which earn income from Indian operations, are subject to a 40% tax rate on their business income. However, income from royalties or fees for technical services is taxed at 50%.¹

Surcharges and Cess

Both domestic and foreign companies are required to pay a surcharge and a 4% Health and Education Cess. Surcharges vary based on income level:¹

• Domestic companies: 7% for income between ₹1 crore and ₹10 crore, and 12% for income over ₹10 crore.
• Foreign companies: 2% for income between ₹1 crore and ₹10 crore, and 5% for income over ₹10 crore.

India also imposes Minimum Alternate Tax (MAT) at 15% on book profits for companies that pay little or no tax due to various deductions and exemptions. This ensures that profitable companies contribute a minimum amount to government revenues.²

Companies with turnover up to ₹400 crores can benefit from a reduced tax rate of 25% without needing to opt for the new tax regime. Additionally, certain sectors like infrastructure and power generation may qualify for specific tax incentives and lower rates.³

How to pay corporate tax in India

Corporate tax in India must be paid in Indian Rupees (INR) through the Income Tax Department's online portal or authorised banks. Companies are required to pay advance tax in quarterly instalments throughout the financial year, with the final payment due by 15 March.⁴

The advance tax payment schedule requires companies to pay 15% by 15 June, 45% by 15 September, 75% by 15 December, and 100% by 15 March. Any remaining tax after advance payments must be paid before filing the return.⁵

Companies must file their income tax returns by 31 October (extended to 30 November for certain cases) following the end of the financial year (31 March).⁶ Late filing attracts penalties ranging from ₹5,000 to ₹10,000, while late payment of tax incurs interest at 1% per month.⁷

Let's say your company has a turnover of ₹11.25 crores (approximately £1.5 million) and operates with a profit margin of 10%, giving it a taxable profit of ₹1.125 crores.

At India's standard corporate tax (old tax regime) rate of 30%, plus 10% surcharge and 4% cess, the effective rate becomes approximately 33.384%.

The tax calculation would be:
Base tax: ₹1.125 crores × 30% = ₹33.75 lakhs
Surcharge: ₹33.75 lakhs × 10% = ₹3.375 lakhs
Sub-total: ₹37.125 lakhs
Health and Education Cess: ₹37.125 lakhs × 4% = ₹1.485 lakhs
Total tax: ₹38.61 lakhs

If advance tax payments are delayed by 30 days, interest at 1% per month would apply on the unpaid amount.

When expanding your business to India, the right financial tools will make the process smoother. Using a platform like Wise Business makes it easy to manage international finances. A multi-currency account allows businesses to pay for incorporation costs, registration fees, and government taxes in local currency without paying high exchange rate fees.

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Tax Compliance in India

Some crucial steps to keep your company compliant with Indian tax regulations⁸:

• Register for taxes promptly: After incorporating your business, register with the Income Tax Department to obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). These are mandatory for filing corporate tax in India and handling employee-related tax obligations.
• Know the corporate tax rate in India: Under the new regime, domestic companies are generally taxed at 22% (plus applicable surcharge and cess), while certain manufacturing companies may qualify for a 15% rate. India’s rates are competitive in the global corporate tax landscape, but businesses should always confirm their exact liability with reference to international corporate tax law when operating across borders.
• Stay on top of due dates: Corporate tax returns in India must be filed by 31 October of the assessment year for companies that require audits. Delays can lead to penalties of up to ₹5,000–₹10,000, with higher interest charges if tax remains unpaid.
• Maintain annual filings: To remain compliant, companies must file annual returns with the Ministry of Corporate Affairs (MCA) in addition to tax returns.

By following these steps and consulting a professional well-versed in Indian corporate tax regulations, you can avoid costly penalties and maintain smooth international operations.

International Expansion to India

India, one of the largest nations in the world, presents an attractive environment for business expansion. As the world’s fifth-largest economy, with a GDP of $3.9 trillion, it offers enormous opportunities across diverse industries.⁹ The country’s strong fundamentals are backed by rapid growth. Its economy expanded by 8.2% in 2024, outpacing initial forecasts, and S&P Global projects that it will become the world’s third-largest economy by 2030–31.¹⁰ Recent credit upgrades also highlight India’s economic resilience and fiscal discipline, adding to the confidence of global investors.

One key driver of opportunity is the rise of India’s middle class. By 2030, nearly 80% of households are expected to be middle-income, accounting for around 75% of consumer spending.¹¹ Alongside this, India has one of the youngest populations in the world, with a median age of just 28.4 years. By 2030, nearly 1.04 billion people will be of working age, providing companies with both a dynamic workforce and a fast-growing consumer base.¹²

Moreover, India’s geographic position also makes it a strategic hub. Located at the crossroads of Asia, it connects businesses to more than 3.2 billion consumers across South Asia, the Middle East, and Africa. Investors also benefit from extensive infrastructure. For instance, it has the world’s second-largest road network, a strong aviation market, major ports, and more than 280 operational Special Economic Zones (SEZs).¹³

Let’s take a quick walkthrough of how businesses can set up a company in India:¹⁴

1. Conduct market research to understand demand, competitors, and alternatives.
2. Develop a detailed business plan with feasibility analysis.
3. Finalize your business name, location, and funding structure.
4. Assess workforce requirements.
5. Register your company with the Ministry of Corporate Affairs (MCA).
6. Open a corporate bank account and maintain accurate records.

The climate seems friendly for business expansion. However, a business should do homework and consult a corporate tax solicitor to fully understand the Indian corporate tax rate, tax return requirements, and how the new corporate tax rate compares globally.

Incorporation of Business in India

To incorporate a business in India, you must complete registration with the Ministry of Corporate Affairs (MCA) through its online portal. This is the central authority responsible for approving company formations.

The following information and documents are typically required:¹⁵

• Company name: a unique name, approved by the MCA.
• Type of company: the entity structure you choose (see below).
• Memorandum of Association (MoA) & Articles of Association (AoA): these act as your company’s constitution and define business objectives and rules.
• Registered office address: must be located in India.
• Directors: at least two for a private company and three for a public company, one of whom must reside in India.
• Digital Signature Certificates (DSCs) & Director Identification Numbers (DINs): required for filing documents online.
• Shareholders and Share Capital: details of ownership and issued capital.

Once incorporated, companies must comply with annual filings, maintain accurate books, and file corporate tax returns on time. Many firms work with a corporate tax lawyer or specialist to ensure compliance and calculate the correct corporate tax percentage. New entrants often invest in corporate tax training for their finance teams to avoid penalties.

Business Entities in India

India’s Companies Act 2013 recognises multiple business structures. Some of the most common include:¹⁵

• Private Limited Company (Pvt Ltd): the most popular option for foreign investors. It limits shareholder liability to their investment and allows easy fundraising. Requires a minimum of two shareholders and two directors.
• Public Limited Company (PLC): suitable for larger businesses looking to raise capital from the public. It requires at least seven shareholders and three directors.
• Limited Liability Partnership (LLP): combines the flexibility of a partnership with the limited liability of a company. Favoured by professional services firms.
• One Person Company (OPC): designed for single entrepreneurs who want limited liability while operating as a corporate entity.
• Sole Proprietorship: the simplest form, where a single owner has full control but unlimited liability.
• Partnership Firm: governed by the Indian Partnership Act, suitable for small businesses run jointly by two or more individuals.

Foreign investors often prefer Private Limited Companies or LLPs for their scalability and compliance benefits. Choosing the right entity type is crucial, as it impacts everything from ownership rules to how corporate tax is filed each year.

International corporate tax best practices

Implementing robust international tax strategies is essential for businesses operating across multiple jurisdictions.

• Stay compliant with local and international tax laws
  Ensure complete legal registration in every operating jurisdiction and maintain timely filing of all required returns. Stay updated with evolving tax regulations and transfer pricing rules to avoid penalties and legal complications.

• OECD and BEPS Guidelines
  Understanding global frameworks like OECD's Base Erosion and Profit Shifting (BEPS) guidelines and Pillar Two Global Minimum Tax helps companies maintain transparency and avoid aggressive tax planning that could lead to disputes with tax authorities.

• Leverage double taxation treaties (DTTs)
  India has comprehensive Double Taxation Avoidance Agreements (DTAAs) with over 90 countries, which can significantly reduce withholding taxes on dividends, royalties, and technical service fees. Proper treaty planning can optimise overall tax costs for international businesses.

• Maintain up-to-date and transparent financial records
  Comprehensive record-keeping is crucial for transfer pricing compliance and tax audits. Indian tax authorities require detailed documentation for related-party transactions, and maintaining contemporaneous records helps avoid penalties and disputes during assessments.

Take the complexity out of international expansion with Wise Business

Researching corporate tax is a crucial step when expanding your business into a new country. The next step is setting up the financial infrastructure to handle the complexities of operating across borders, from managing multi-currency cash flow to mitigating FX risk.

The Wise Business account provides the financial tools to make your international expansion to India efficient and simple. It's the one account for managing your money globally.

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• Pay suppliers and initial fees: Pay suppliers, global payroll, and one-off incorporation costs in the local currency.

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• Manage your money across borders: Hold and exchange 40+ currencies in one account, always with the mid-market exchange rate and low, transparent fees.

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• Empower your team: Provide multi-user access for your finance team and issue expense cards for international spending.

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FAQs - Corporate tax in India

Who is liable for corporate tax in India?

All Indian resident companies are liable for tax on their global income, while foreign companies are taxed only on income earned in India. A company is considered resident if it's incorporated in India or if its place of effective management is in India during the financial year.

Are there any tax incentives for businesses in India?

Yes, India offers various incentives, including reduced rates for new manufacturing companies, deduction for research and development expenditure, accelerated depreciation for certain assets, and special economic zone benefits. Export-oriented businesses can also claim deductions under Section 80HHC.

What is the tax treatment of dividends in India?

Dividends received by Indian companies from other Indian companies are generally tax-free. However, dividends from foreign companies are taxable in the hands of the recipient company. Dividend Distribution Tax was abolished in 2020, making dividends taxable in the hands of shareholders.¹⁶

What is the process for registering for corporate tax in India?

Companies must obtain a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department. Registration can be done online through the e-filing portal, and companies must also register for Goods and Services Tax (GST) if their turnover exceeds prescribed limits.

What are the common pitfalls to avoid regarding corporate tax in India?

Common mistakes include inadequate transfer pricing documentation, missing advance tax payment deadlines, incorrect TDS compliance, failing to maintain proper books of accounts, and not obtaining necessary approvals for foreign investments. Companies should also be cautious about deemed dividend provisions and thin capitalisation rules.

Sources used in this article:

1. Corporate Tax Rates in India in 2025
2. Tax Planning Under Minimum Alternate Tax (MAT)
3. Analysis of the Direct Tax Code Bill, 2010
4. Guide to Advance Tax in India
5. Income Tax India: FAQs on Advance Tax Payments
6. Income Tax India: FAQs on Filing Income Tax Return
7. Consequences of Filing a Late Tax Return
8. How to Save Tax in India for a Private Limited Company
9. India GDP (current US$)
10. S&P Global: India to become the third largest economy by 2030
11. 10 Megatrends for India in 2030
12. EY: Reaping India's Demographic Dividend
13. 10 Reasons Why India is the Next Global Investment Hub
14. How to Start a Business in India
15. Startup India: Business in India - Go-to-Market Guide
16. Changes in the Law Under Dividend

Sources last checked 28/08/2025

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