Mostly preferred by the start-ups ventures private companies provided the best stage for growth, innovation and stability. A private company is a legal entity in India held by a small group of people. The company is first required to get registered under the Companies Act 2013 in order to attain its legal identity. The governing body of a private entity is the Ministry of Corporate Affairs. The section 2(68) of the company’s act provides for the definition of the private company.

With certain restrictions, it becomes necessary to understand the taxing structure of this entity. Let us understand them.

Annual Compliances for domestic companies

Annual Compliances for domestic companies with turnover of INR 200 crore

With annual turnover up to INR 250 crore

25% + 12% (surcharge)

With annual turnover up to or more than INR 250 crore

30% + 12% (surcharge)

Annual Compliances for domestic companies with turnover above INR 400 crore

With turnover up to INR 1 crore

30% (with no surcharge levied)

With turnover from INR 1 crore up to INR 10 crore

30,00,000 + 30% + 7% (surcharge)

Above INR 10 crore

3,00,00,000 + 30% + 12% (surcharge)

Annual Compliances for domestic companies with turnover less than INR 400 crore

Up to INR 1 crore

25% + no surcharge

INR 1 crore up to 10 crores

25,00,000 + 25% + 7% (surcharge)

Above 10 crores

2,50,00,000 + 25% + 12% (surcharge)

MAT (MINIMUM ALTERNATE TAX) applicability on private companies is 15%.

Corporates which are not seeking any kind of minimum alternate tax/incentives/exemptions will have the basic tax rate as 22% (earlier it was 30%) with an additional cess and surcharge. This leads to an effective tax rate of approximately 25.17%.

Annual Compliances for foreign companies

A foreign company is taxed only on the income it earns in India. Under the Income Tax Act foreign company also gets covered for the taxation policy.

40% + 2% (surcharge for net income INR 1 crore to INR 10 crore)

With additional surcharges and cess the tax rate can vary from 41.60% to 42.43% to 43.68% depending upon your turnover and profitability.

The corporate taxes are calculated on the NET INCOME of the company. The net income of the company constitutes the entire revenue generated by the company after certain deductions (staff salary, loan, depreciation, administrative expenses, management expenses, advertising expenses if availed any such services, bonus etc).

Hopefully this read gives you an insight of what you were looking for.

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