Taxation for Companies in India

Foreign Companies are those who operate in India through a branch office and others who are not incorporated under the (Indian) Companies Act, 1956 and who may be construed to have a permanent establishment in India.

A wholly owned subsidiary of a foreign company is treated as a Domestic Company for all purposes including taxation. So is the case with the all Joint Venture Companies which are incorporated under the (Indian) Companies Act, 1956.

There are no tax slabs for Firms, Domestic and Foreign Companies.  They are taxed even on their first rupee of profits.

A liaison office is not permitted to generate revenue of its own in India and hence a liaison office is not taxed for corporate income taxes. A liaison office though is liable to pay other taxes such as Fringe Benefit Tax, if applicable.

Income Tax Rates for the Financial Year 2006-2007

Individuals:

Income Range (Rupees)	Tax Rate (%)
1 - 1,00,000	Nil
1,00,001 - 1,50,000	10
1,50,001 - 2,50,000	20
2,50,001 and above	30

Surcharges of 10% is levied on income exceeding Rs.8,50,000.

Education Cess of 2% is levied on the amount of Tax.

Senior citizens with income up to Rs.1,50,000 are exempt from Income Tax.

Women with income up to Rs.1,35,000 are exempt from Income Tax .

Firms and Companies:

Type of Legal Entity	Tax Rate (%)
Firms	30
Domestic Companies	30
Foreign Companies	40

A Surcharge of 10% and an Education cess of 2% on the amount of tax is payable in all categories.

Companies which are Tax Exempt:
100% EOU's till 31^st March 2009. SEZ Units (100% exemption from payment of corporate income tax for the first five years and thereafter 50% tax exemption for the next five years)

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