Business Income Tax Rate for AY 2025-26

Companies are the most prevalent and popular form of legal entity for doing business in India. Each year nearly a lakh companies are incorporated in India and the process for incorporation of a company has been made simpler. All companies registered in India are required to file an income tax return before the due date to avoid the penalties and legal consequences. It is important for the companies to understand the business income tax rate and business income tax slab to navigate through legalities in India. The business income tax rate return must be audited by a practising Chartered Accountant and file using form ITR-6. In this article, we look at the business income tax rate in India.

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Income of a Company

Income tax is levied on the total income of the company computed as per the Income Tax Act. Total income of a company is closely related to the profit of the company. Total income is not related to the turnover or sales revenue of a company. Hence, the applicability of income tax would be relevant exclusively if the company has profits. A company would not be required to pay income tax, if total income or profit is negative i.e., the company has incurred losses during a year. In case of loss, the loss can be carried forward to set off against future profits.

Financial Year vs Assessment Year

Most companies in India adopt a financial year that runs from 1st April to 31st March. Assessment year begins at the end of the financial year and would deal with the financial year that just ended. For example, the financial year 2017 - 18 pertains to 1st April 2017 to 31st March 2018 and assessment year 2018-19 would start from 1st April 2018 and end on 31st March 2019. In the assessment year 2018-19, the income tax return of the company pertaining to the financial year 2017-18 would be filed.

Must read: Tax Year in Income Tax

Applicable Forms for Companies

In India, companies are required to file tax returns based on the business income tax rate using specific forms based on their nature and activities. Below are the key forms that companies need to use for income tax filings:

ITR-6

ITR-6 is applicable for companies other than those claiming exemption under Section 11 of the Income Tax Act. This form is used by various types of companies, including:

• Indian Companies: Companies incorporated under Indian laws.
• Foreign Companies: Bodies corporate incorporated under the laws of a country outside India.
• Other Entities Declared as Companies: Any institution, association, or body, whether incorporated or not, Indian or non-Indian, that is declared by the Board through a special or general order to be a company.

ITR-6 is used by these companies to file their income tax returns, and it provides a comprehensive format for reporting income, deductions, taxes, and other statutory requirements for corporate entities.

ITR-7

ITR-7 is applicable for individuals, Hindu Undivided Families (HUFs), and companies that are required to furnish returns under sections 139(4A), 139(4B), 139(4C), or 139(4D). These sections are applicable to specific types of income and entities as follows:

• Section 139(4A): Entities deriving income from property held under a trust for charitable or religious purposes, either wholly or in part.
• Section 139(4B): Political parties, with the Chief Executive Officer (CEO) of the party required to file the return.
• Section 139(4C): Various entities like research associations, news agencies, and other bodies mentioned under Section 10 of the Income Tax Act.
• Section 139(4D): Universities, colleges, or other institutions referred to under Section 35 of the Income Tax Act, which are entitled to tax exemptions.

Business Income Tax Slabs for Domestic Companies for AY 2025-26

The following table outlines the applicable business income tax slabs for domestic companies in India for the Assessment Year 2025-26, based on turnover and whether the company opts for any special provisions under the Income Tax Act:

Condition	Income Tax Rate (excluding surcharge and cess)
Total Turnover or Gross Receipts during the previous year 2020-21 does not exceed ₹400 crores	25%
If opted for Section 115BA (for manufacturing companies)	25%
If opted for Section 115BAA (for companies availing reduced tax rate)	22%
If opted for Section 115BAB (for new manufacturing companies)	15%
Any other Domestic Company	30%

Surcharge, Marginal Relief, and Health & Education Cess

1. Surcharge:

Surcharge is an additional tax levied on the income tax payable when the taxable income exceeds certain limits. The surcharge is calculated on the income tax amount.

Taxable Income	Surcharge Rate
Taxable income above ₹1 crore and up to ₹10 crore	7%
Taxable income above ₹10 crore	12%
Companies opting for Section 115BAA or Section 115BAB	10%

2. Marginal Relief:

Marginal Relief is provided when the surcharge payable exceeds the additional income that makes the company liable for surcharge. The surcharge amount shall not exceed the income earned exceeding ₹1 crore or ₹10 crore, respectively.

3. Health & Education Cess:

A Health and Education cess of 4% will be levied on the income tax payable, in addition to any surcharge that applies.

Minimum Alternate Tax (MAT)

• A company shall be liable to pay Minimum Alternate Tax (MAT) at 15% of book profit (plus applicable surcharge and cess) if the normal tax liability is less than 15% of book profit.
• For a company located in an International Financial Services Centre (IFSC) and deriving income solely in convertible foreign exchange, MAT is payable at 9% (plus surcharge and cess).
• Companies opting for tax rates under Section 115BAA or Section 115BAB are exempt from MAT.

Learn more: Minimum Alternate tax for Companies & LLPs

Deductions for Companies Opting for Special Tax Rates

Companies that opt for special tax rates under Sections 115BAA or 115BAB are not allowed to claim certain deductions such as:

• Section 80IA
• Section 80IAB
• Section 80IAC
• Section 80IB

However, they can still claim deductions under:

• Section 80JJAA
• Section 80M

These provisions are designed to encourage specific business sectors, like manufacturing, and to streamline tax compliance. Companies should carefully evaluate their eligibility for special tax rates and consider their potential deductions when determining the most beneficial tax strategy.

Partnership Firm Tax Rate for AY 2025-26

Partnership firm tax rate in India are liable to pay income tax at a flat rate of 30% on their taxable income. This applies irrespective of the turnover or the nature of the partnership.

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FAQs

1. What is the income tax slab for private limited company for AY 2025-26?

The income tax slab for private limited company is based on turnover and the option of specific tax provisions. For most domestic companies with turnover under ₹400 crores, the tax rate is 25%. If opting for Section 115BAA, it is 22%, and for Section 115BAB, it is 15%.

2. What is the company profit tax rate for private limited companies? 

The profit tax rate for private limited companies depends on their turnover and whether they opt for special tax provisions. Generally, it can be 25%, 22%, or 15%, based on the relevant provisions in the Income Tax Act.

3. How is calculating corporate income tax done for companies in India? 

Calculating corporate income tax involves determining the total taxable income after accounting for deductions, exemptions, and special tax rates. Companies must then apply the applicable tax rate based on their turnover, type of business, and any special provisions like Sections 115BAA or 115BAB.

4. What is the tax rate for partnership firm? 

Partnership firms in India are required to pay income tax at a flat rate of 30% on their taxable income, regardless of their turnover or the structure of the partnership.

5. How do the income tax rates differ for private limited companies and partnership firms?

Private limited companies can benefit from tax slabs of 15% to 30% based on specific conditions like turnover and opting for special provisions under Sections 115BAA or 115BAB. In contrast, partnership firms are taxed at a flat rate of 30%.

6. What is the income tax rate for private limited company under Section 115BAA?

The income tax rate for private limited company opting for Section 115BAA is 22%. This option is available for companies that wish to avail themselves of the reduced tax rate but are not allowed certain deductions.

7. What is the minimum alternate tax (MAT) for companies in AY 2025-26?

Companies that have a normal tax liability lower than 15% of their book profit are required to pay Minimum Alternate Tax (MAT) at 15%. Companies opting for special tax rates under Sections 115BAA or 115BAB are exempt from MAT.

8. How does the surcharge impact the company profit tax rate? 

The surcharge is an additional tax on the income tax payable. It applies if the taxable income exceeds ₹1 crore. The surcharge rate is 7% for taxable income between ₹1 crore and ₹10 crore, and 12% for income above ₹10 crore.

9. Can companies opting for special tax rates under Section 115BAB avail any deductions?

No, companies opting for special tax rates under Section 115BAB are not allowed to claim deductions like those under Section 80IA, 80IB, and other similar sections, except for Section 80JJAA and 80M.

10. What is the health and education cess applicable to companies?

Health and Education cess of 4% is levied on the total income tax payable, including any surcharge that might apply. This cess is meant to fund healthcare and education initiatives in India.

11. Is the income tax slab for private limited companies based on turnover? 

Yes, the income tax slab for private limited companies is influenced by the turnover during the previous year. For companies with turnover under ₹400 crores, the tax rate is 25%, while those opting for special provisions may pay a lower rate.

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Updated on: February 18th, 2025