Corporate Tax in India 2025–26: Rates, Regimes & Complete Guide
Think of corporate tax as the rent a company pays to the government for the right to do business in India. Unlike the taxes we pay as individuals, which often move in small steps (slabs), companies usually deal with flat rates based on their size and type. For the 2025-26 fiscal year, the government has kept a steady focus on making India a manufacturing first hub by offering very low rates for new factories. For a business owner, the goal isn't just to pay the bill, but to understand which tax regime fits their business model best allowing them to reinvest more profit into growth rather than taxes.
What is Corporate Tax?
In simple terms, Corporate Tax is a tax on the net profit of a company. If you have a registered company (like a Pvt Ltd), the law sees it as a separate person. The company earns money, pays its bills (salaries, rent, materials), and whatever is left over the profit is what the government taxes.
Similar read: What is Corporate Tax?
What is Taxable?
A company doesn't just pay tax on its sales. It pays on:
- Operating Profits: The money left after daily business expenses.
- Capital Gains: Profit made from selling a factory, office space, or shares.
- Passive Income: Rent from extra office space or interest earned on bank deposits.
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The 2025-26 Corporate Tax Menu
For the current year, domestic companies in India have two main menus to choose from. You can stay in the Normal Regime (where you keep your deductions) or move to the Concessional Regime (lower rates, but no deductions).
1. Domestic Companies (The Standard Rates)
Most established companies fall into these brackets based on their past turnover.
Business Size
Turnover Criteria (FY 2023-24)
Base Tax Rate
Small/Medium
Turnover up to ₹400 Crore
25%
Large
Turnover above ₹400 Crore
30%
2. The New Concessional Regimes (The Low Tax Choice)
To simplify things, the government introduced two special sections. Most companies are now switching to these because they are simpler to manage.
- Section 115BAA (The 22% Rate): Any existing domestic company can opt for this. The base rate is 22%, but you have to give up certain exemptions (like the tax break for R&D).
- Section 115BAB (The 15% Rate): This is the golden ticket for new manufacturing companies. If you set up a new factory and started production by March 31, 2024, your base tax is only 15%.
Effective Tax Rates (Including Surcharge & Cess)
The Base Rate is rarely what you actually pay. You have to add a Surcharge (extra tax on the tax) and a 4% Health & Education Cess.
Regime Chosen
Base Rate
Surcharge
Cess
Effective Rate
Section 115BAA
22%
10%
4%
25.17%
Section 115BAB
15%
10%
4%
17.16%
Normal (Up to 400Cr)
25%
7-12%*
4%
~26% - 29%
*Surcharge for normal companies depends on profit: 7% for profit over ₹1 Cr, 12% for profit over ₹10 Cr.
Foreign Companies in India
If your company is incorporated outside India (like a branch of a US or UK firm), the rules are a bit different. They pay a higher base rate but a lower surcharge.
- Base Tax Rate: 35% (Reduced in 2024/25 from 40%).
- Surcharge: 2% (if profit is ₹1 Cr - ₹10 Cr) or 5% (if profit > ₹10 Cr).
- Effective Rate: Usually stays around 36.4% to 38.2%.
Minimum Alternate Tax (MAT): The Safety Net
Sometimes, companies use clever accounting to show zero profit on paper while having millions in the bank. To stop this, the government uses MAT.
- Standard MAT Rate: 15% of book profits.
- IFSC Units: For units in the GIFT City (IFSC), the MAT is just 9%.
- Good News: If you choose the 22% or 15% concessional regimes (115BAA/BAB), you don't have to pay MAT at all.
Conclusion
The 2025-26 corporate tax landscape is all about choice. If your company has a lot of old losses or huge investment-linked deductions, the Normal Regime (25%/30%) might still be your friend. But for most modern, profitable companies, the 22% flat rate is becoming the default choice because it removes the headache of MAT and complex calculations. For the Indian government, these taxes are the fuel for infrastructure; for you, they are a cost of doing business that can be managed with the right strategy.