Private Limited Company Tax Rate 2017

Private Limited Company Tax Rate 2017

Private Limited Company Tax Rate 2017

Private limited company is the most preferred type of business entity in India. Each year nearly a lakh companies are incorporated in India. All private limited companies registered in India are required to file income tax return in form ITR 6 or ITR 7 each year mandatorily, irrespective of turnover or profitability. Hence, even private limited companies incorporated and not having any business activity are required to file income tax return. In this article, we look at the income tax rate applicable for private limited companies during the assessment 2017  – 2018.

How to calculate total income for 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. Hence, income tax would be applicable only if the company has total income. A company would not be required to pay income tax, if total income is negative i.e., the company has incurred losses during a year.

Calculating Total Income for Private Limited Company
Calculating Total Income for Private Limited Company

Private Limited Company Tax Rate

In the 2015 Budget, the Hon’ble Finance Minister announced that corporate tax rate would be reduced to 25%. Accordingly, private limited company tax rate has been fixed at 25% and 30%.

  • Private limited company with a total turnover of upto Rs.50 crores during the previous year are taxed at 25% of total income.
  • Private limited company with a total turnover of more than Rs.50 crores during the previous year are taxed at 30% of total income.

In addition to income tax, a private limited company is also liable to pay income tax surcharge, education cess and secondary and higher education cess.

Income Tax Surcharge

Income tax surcharge is applicable only for private limited companies having a total income of more than Rs.1 crore. If a private limited company has total income of Rs.1 crore to Rs.10 crore, surchage at the rate of 7% would be applicable on the income tax payable.

In case of private limited companies having total income of more than Rs.10 crores, a 12% surcharge would be applicable on the income tax payable.

Cap on Income Tax Surcharge for Companies

Income tax surcharge is capped. For a private limited company having a total income exceeding Rs.1 crore but not exceeding Rs.10 crores, the total amount payable as income-tax and surcharge would not exceed the total amount payable as income-tax on a total income of Rs.1 crore by more than the amount of income that exceeds Rs.1 crore.

Also for a private limited company having a total income of more than Rs.10 crores, the total amount payable as income-tax and surcharge would not exceed the total amount payable as income-tax and surcharge on a total income of Rs.10 crores by more than the amount of income that exceeds Rs.10 crores.

Education Cess for Company

Private limited companies are liable to pay education cess at the rate of 2% of the amount of income tax as increased by the applicable surcharge.

Secondary and Higher Education Cess for Company

Private limited companies are liable to pay secondary and higher education cess at the rate of 1% of the amount of income tax as increased by the applicable surcharge.

Minimum Alternate Tax for Company

Some companies that generated income during a year are able to reduce the tax liability by taking advantage of various income tax laws and provisions. This led to an increase in the number of zero tax paying companies. Hence, minimum alternate tax was introduced by the Government. Minimum alternate tax is applicable only when the normal tax liability of the company is less than 18.5% of book profit. Minimum alternate tax is applicable for private limited companies at the rate of 18.5% of book profit plus surcharge and education cess.

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