Ushma & Associates
Corporate Tax Filing:
In India both domestic as well as foreign companies shall pay Corporate tax. Like all individuals earning income are supposed to pay a tax on their income, corporates too are supposed to pay as tax on their income earned.
Any company that is Indian is called as domestic company. If the company is foreign but the control and management is wholly situated in India then also it is termed as a domestic company. A foreign company is any entity that has been incorporated outside India and happens to have a place of business in India either physically, through any other agent or via electronic/digital means or business activities are conducted by the entity in any other manner.
Any income earned by foreign company in India shall be reported in India through filing annual income tax return and any tax liability, if any, shall be paid in India. If you are a foreign company providing various services in India like architectural, business consultancy or engineering planning or designing etc then you shall file your tax return in India to report your income and pay applicable income tax.
While determining taxability, company shall consider various factors like existence of Permanent establishment, DTA provisions, tax rate applicable, audit requirement etc.
Tax slab applicable for foreign companies in most of the cases is 40% but if a foreign company is only providing technical services in India, then a special rate of 10% is applicable.
Along with the tax rate, Surcharge will also be levied at the rate of 2% if taxable income is between ₹ 1 crore and ₹ 10 crore and 5% if taxable income is above ₹10 crore.
All companies shall file their tax return in India to report their income in India. It is important as it will avoid getting unnecessary notices from income tax department. Return shall be filed even if appropriate withholding taxes has been deducted on income to maintain clean records with Indian Income Tax department. DTAA (Double Tax Avoidance agreement) shall also be considered while filing tax returns to take benefit of favourable provisions. Return shall also be filed to claim refund if TDS is deducted at higher rate then actual tax liability.