Surcharge: An additional tax levied on top of basic income tax based on income level.

Domestic Companies:

• Below ₹1 Crore: 0% Surcharge
• ₹1 Crore to ₹10 Crore: 7% Surcharge
• Above ₹10 Crore: 12% Surcharge

Foreign Companies:

• Below ₹1 Crore: 0% Surcharge
• ₹1 Crore to ₹10 Crore: 2% Surcharge
• Above ₹10 Crore: 5% Surcharge

Example: Domestic company with ₹50 lakh income gets 7% surcharge on calculated tax.

Health & Education Cess (HEC): A 4% cess levied on the total of income tax plus surcharge.

Purpose: To fund health and education initiatives in India.

Calculation:

HEC = (Basic Tax + Surcharge) × 4%

Example: If basic tax is ₹100 and surcharge is ₹10, then HEC = (100 + 10) × 4% = ₹4.40

Applicability: Levied on all taxpayers - individuals, companies, and other entities.

MAT Definition: Minimum Alternate Tax is a provision that ensures companies pay at least 15% tax on their book profits, even if they use exemptions and deductions to reduce taxable income to zero.

Why MAT? Prevents tax avoidance by companies with high book profits but low taxable income.

MAT Applicability:

• Applies if: Calculated Tax < 15% of Book Profit
• Does NOT apply to companies under Section 115BAA or 115BAB (new regime)
• MAT Credit available for 15 years if paid in excess

Formula: MAT = Book Profit × 15% + Surcharge + Cess

Example: Company with ₹1 Crore book profit but only ₹5 Lakh calculated tax must pay MAT of ₹15 Lakh.

DDT Status: ABOLISHED IN 2020

Historical Context: Prior to 2020, companies paid 15% DDT on dividends declared to shareholders (effective rate: 17.65%).

Current Rule (From 2020 onwards): Dividends are now taxed in shareholders' hands, not at company level.

TDS on Dividends:

• 10% TDS deducted on amounts exceeding ₹10,000
• 20% TDS for non-resident shareholders
• Shareholders get TDS credit during ITR filing

Impact on Shareholders: Dividends taxed at individual slab rates (0%, 5%, 20%, 30%) with TDS deduction available as credit.

Purpose: Lower tax rates for companies to boost business competitiveness.

Section 115BAA - General Companies:

• Tax Rate: 22%
• Surcharge and Cess applicable
• Effective Rate: ~24-30% depending on income
• Benefit: No deductions or exemptions allowed
• MAT: NOT applicable

Section 115BAB - Manufacturing Companies:

• Tax Rate: 15%
• Eligibility: Newly established manufacturing companies
• Effective Rate: ~16-21% with surcharge and cess
• Benefit: Significantly lower tax burden
• MAT: NOT applicable

Key Difference: New regime = lower rates but no deductions. Old regime = normal rates with deductions.

Effective Tax Rate: The total tax paid as a percentage of taxable income.

Formula:

Effective Rate = (Total Tax / Taxable Income) × 100%

Example Calculation:

Taxable Income: ₹1 Crore

• Basic Tax (30%): ₹30 Lakh
• Surcharge (12%): ₹3.6 Lakh
• Cess (4%): ₹1.344 Lakh
• Total Tax: ₹34.944 Lakh

Effective Rate = (34.944 Lakh / 1 Crore) × 100% = 34.94%

Note: Effective rate is always higher than basic rate due to surcharge and cess.

Book Profit: The profit shown in a company's profit and loss account (prepared as per Companies Act) with certain adjustments.

Adjustments to Book Profit (Additions):

• Income tax paid or payable
• Provisions for unascertained liabilities
• Depreciation as per books
• Dividends paid or proposed
• Other non-deductible expenses

Adjustments to Book Profit (Deductions):

• Income exempt under Section 10
• SEZ unit profits
• Revaluation reserve adjustments

Key Difference: Book Profit ≠ Taxable Income. MAT is based on book profit regardless of tax exemptions.

Mandatory Filing: All companies (domestic and foreign) must file income tax returns regardless of profit or loss.

Exceptions: None - companies cannot be exempted from ITR filing.

Filing Deadline: 31st October (AY 2025-26) - extended from 30th September

Documents Required:

• Profit & Loss Statement
• Balance Sheet
• Financial Statements
• Audit Report (if required)
• Details of Income, Expenses, Deductions

Penalties for Late Filing: Up to ₹10,000 or as per legal provisions.

Corporate Income Tax (CIT): Regular tax calculated on taxable income at applicable slab rates (25%, 30%, 35%, etc.)

Minimum Alternate Tax (MAT): Alternative tax at 15% of book profit when CIT is low due to exemptions/deductions.

Key Difference: Company pays whichever is HIGHER - calculated CIT or MAT liability.

Yes: It's optional for domestic companies to choose between old regime (with deductions) or new regime (lower rates, no deductions).

Choice Irreversible: Once selected in ITR, cannot change in same assessment year.

Comparison Needed: Calculate both scenarios to determine which saves more tax.

No: Surcharge varies by company type and income level.

Domestic Companies: 7% or 12%

Foreign Companies: 2% or 5%

Non-residents have lower surcharge rates to encourage foreign investment.

Tax Payment Deadline: 30th June following the financial year end (for most companies)

ITR Filing Deadline: 31st October (extended from 30th September)

Interest on Late Payment: 1% per month on unpaid tax amount.

No: New regime (Section 115BAA/115BAB) doesn't allow any deductions or exemptions.

Trade-off: Lower tax rate in exchange for no deductions.

Old Regime: Allows all deductions but at regular tax rates.

MAT Credit: If MAT paid > Regular tax calculated, the excess can be carried forward.

Carry Forward Period: Up to 15 assessment years.

Adjustment: Can be used to reduce tax liability in future years when regular tax exceeds MAT.