Private Limited Company Corporate Tax Rate in 2025: Key Insights and Updates

In 2025, keeping up-to-date with the corporate tax rates for private limited companies in India is crucial. With ongoing tax policy updates to boost business growth and attract investment, staying informed on applicable rates is crucial for financial planning and long-term strategy. Over the past few years, India has made several notable tax reforms, such as reducing rates for domestic companies and introducing optional concessional regimes under Section 115BAA and 115BAB.

To incorporate a private limited company, especially startups and SMEs, accurate knowledge of the latest corporate tax rates, available exemptions, and compliance requirements ensures smarter decision-making. It also helps in avoiding unnecessary penalties, which can be as high as ₹1 lakh or more for certain non-compliance issues under the Income Tax Act.

This blog will cover the applicable corporate tax rates for AY 2025–26. It includes details on normal and concessional rates, as well as surcharge and cess information. Additionally, we discuss recent amendments and provide effective tax planning insights for private limited companies operating in India.

Basic Concepts & Terms You Should Know About Private Limited Company Tax Rate

Before diving into the latest updates and tax rates, it’s important to get familiar with the key concepts you should know. Defining these concepts ensures a clear understanding of corporate taxation and lays the foundation for smarter tax planning.

1. Domestic Company vs. Foreign Company

Feature	Domestic Company	Foreign Company
Definition	An Indian company, or any other company that has made the prescribed arrangements for the declaration and payment of dividends within India. An Indian company is one registered under the Companies Act, 2013.	Any company that is not a domestic company (i.e., a company incorporated outside of India).
Tax Residency	Considered a resident in India.	Considered non-resident, unless its Place of Effective Management (POEM) is in India (subject to certain thresholds).
Scope of Taxation	Taxed on its worldwide income (global income is taxable in India).	Taxed only on income that is received, accrued, or arises (or is deemed to accrue or arise) in India.
Tax Rate	Generally subject to lower corporate tax rates, with options for highly concessional regimes (22% or 15%).	Generally subject to a higher standard tax rate (e.g., 40%), plus surcharge and cess.

2. Total Income vs. Turnover / Gross Receipts

Feature	Total Income (or Net Taxable Income)	Turnover / Gross Receipts
Definition	The final figure on which the income tax is actually levied. It is calculated by taking Gross Total Income (sum of income under all 5 heads) and subtracting allowable tax deductions (e.g., under Chapter VI-A).	The total amount realized or realizable by a business from the sale of goods or services. For professionals, this is referred to as Gross Receipts. It represents the top-line revenue.
Nature	A net concept (after deducting expenses, depreciation, and tax deductions).	A gross concept (before deducting expenses or tax deductions).
Relevance	Used for calculating the actual tax liability.	Used for determining compliance requirements, such as the applicability of tax audit and eligibility for certain concessional tax rates.

3. Assessment Year (AY) vs. Financial Year (FY)

Understanding the difference between Financial Year (FY) and Assessment Year (AY) is crucial for accurate tax planning and timely filing of returns. While the Financial Year refers to the period when income is earned, the Assessment Year is the period when that income is assessed and taxed.

• Financial Year (FY) / Previous Year: This is the 12-month period during which income is earned, starting from 1st April and ending on 31st March of the following year.
  
  • Example: FY 2025-26 is the period when income is earned.
    
• Assessment Year (AY): This is the 12-month period immediately following the Financial Year, during which the income earned in the FY is assessed and taxed.
  
  • Example: AY 2025-26 is when the tax return for FY 2025-26 is filed and the assessment is completed.

4. Other Key Corporate Tax Terms

Here’s a simple explanation of some important corporate tax terms for private limited companies:

• Surcharge: A surcharge is an additional tax on the income tax itself. It applies when a company’s total income exceeds specified limits (for example, ₹1 crore for domestic companies). The surcharge is calculated as a percentage of the computed income tax.
  
• Cess (Health and Education Cess): This is a mandatory levy on the total tax liability (Income Tax + Surcharge). It is collected to fund government services like health and education. The current rate is 4%, applied to the income tax plus surcharge.
  
• Marginal Relief: Marginal relief ensures that when a company’s income slightly exceeds a surcharge threshold, the increase in tax payable does not disproportionately exceed the additional income earned. It prevents taxpayers from paying a higher tax than what is fair for their marginal income.
  
• Book Profit: Book profit refers to the net profit shown in a company’s Profit & Loss Account under the Companies Act. For tax purposes, authorities adjust it according to Section 115JB of the Income Tax Act to calculate the base for Minimum Alternate Tax (MAT).
  
• MAT (Minimum Alternate Tax): MAT ensures that highly profitable companies still pay a minimum amount of tax. This applies even if their taxable income is reduced to near zero through exemptions, deductions, or depreciation. Under MAT, the company pays the higher of the normal tax liability or 15% of its book profit.

For a detailed understanding of how book profits are calculated and MAT is applied, you can read our blog on Section 115JC of the Income Tax Act.

Income Tax for Private Limited Companies

Private limited companies in India are required to follow specific tax rules. Filing income tax is mandatory regardless of profits or turnover.

A Private Limited Company can be of two types:

1. Domestic Company – A company where there are no foreign investments.
   
2. Foreign Company – A company in which foreign investments are involved.

Tax filing is mandatory for all private limited companies. This means that irrespective of turnover or profit/loss, every company must file its Income Tax Return (ITR) and comply with ROC regulations.

Returns Applicable for Domestic Companies: Domestic companies must submit their tax returns using the appropriate forms as prescribed by the Income Tax Department.

Form ITR-6

This form is used by companies that do not claim exemption under Section 11 of the Income Tax Act.

It is applicable for:

• Indian companies
  
• Foreign companies incorporated outside India
  
• Any institution, association, or body (whether incorporated or not, Indian or foreign) declared by the Income Tax Board as a company

Form ITR-7

This form is required for companies or persons who must file returns under specific sections of the Income Tax Act.

It applies to:

• Section 139(4A): Income from property held under a trust for charitable or religious purposes
  
• Section 139(4B): Chief Executive Officer of a political party
  
• Section 139(4C): Entities like research associations, news agencies, etc., mentioned under Section 10
  
• Section 139(4D): Universities, colleges, or institutions referred to in Section 35

Want to know which ITR form applies to your company? Read our full blog on Types of ITR for Companies to get detailed guidance and ensure compliance.

Filing Deadlines

All companies in India must file their business tax returns on time to avoid penalties.

For example, for FY 2025-26, the deadline was 30 September 2025.

Corporate Tax for Private Limited Companies

The Finance Budget categorizes corporate tax based on the company’s turnover.

The categories are:

• Turnover above ₹400 Crore
  
• Turnover below ₹400 Crore

Corporate Income Tax Rate for AY 2025-26

Here are the Income Tax rates for Private Limited Companies in India for FY 2025-26 (AY 2025-26). This shows the tax slabs for private limited companies based on turnover.

Tax Rate for Companies with Turnover Above ₹400 Crore

Income Slab	Tax Rate
Up to ₹1 Crore	30%
Above ₹1 Crore but up to ₹10 Crore	₹3,00,000 + 30% of income above ₹1 Crore
Above ₹10 Crore	₹3,00,00,000 + 30% of income above ₹10 Crore

Tax Rate for Companies with Turnover Below ₹400 Crore

Net Income Slab (Gross Taxable Income – Deductions)	Income Tax Rate	Rebate u/s 87A (FY 2021-22)
Up to ₹1 Crore	25%	Nil
Above ₹1 Crore but up to ₹10 Crore	₹25,00,000 + 25% of income above ₹1 Crore	Nil
Above ₹10 Crore	₹2,50,00,000 + 25% of income above ₹10 Crore	Nil

Which Concessional Tax Regime Should Your Domestic Company Opt for: Section 115BAA or 115BAB 

For AY 2025-26, the income tax rate for domestic companies depends on the turnover/gross receipts during the previous financial year (FY 2020-21) and the tax section opted by the company.

Condition	Income Tax Rate (excluding surcharge & cess)
Total turnover or gross receipts ≤ ₹400 crores	25%
If you opt for Section 115BA	25%
If you opt for Section 115BAA	22%
If you opt for Section 115BAB	15%
Any other domestic company	30%

Additional Taxes

Apart from the base Income Tax, a private limited company in India may also be liable for several additional taxes, depending on its operations and transactions:

• Surcharge: An extra tax levied on the income tax itself when total income exceeds specified thresholds.
  
• Education Cess: A mandatory levy to fund government education programs.
  
• Secondary and Higher Education Cess: Additional cess to support higher education initiatives.
  
• Dividend Distribution Tax (DDT): Mostly abolished from FY 2020-21, but applicable in certain legacy cases.
  
• Transfer Pricing: Tax adjustments for transactions with related parties, especially international transactions, to ensure fair pricing.
  
• Withholding Taxes (TDS/TCS): Tax deducted at source on payments made by the company for salaries, contractors, or other specified transactions.
  
• MAT Credit Reversal: If MAT is paid in excess in earlier years, it may be carried forward, but certain reversals can occur under specific conditions.

Income Tax Surcharge: Additional Taxes

An income tax surcharge is an extra charge on the income tax for companies with higher income during a financial year. It applies only to private limited companies whose total income exceeds ₹1 crore.

• For companies with total income between ₹1 crore and ₹10 crore, a 7% surcharge is applied on the income tax payable.
  
• For companies with total income above ₹10 crore, a 12% surcharge is applied on the income tax payable.

Budget 2025 Update

• The surcharge for the Association of Persons (AOPs) having only companies as members is restricted to 15%. This applies to AOPs whose total income exceeds ₹2 crore.
  
• Surcharge on Long-Term Capital Gains (LTCG) from listed equity shares, mutual funds, and units is capped at 15%.

Education Cess for Companies

Private limited companies are required to pay education cess at 4% of the income tax plus surcharge.

The following table summarizes income tax, surcharge, and education cess for private limited companies for AY 2025-26:

Net Income Slab (Gross Taxable Income – Deductions)	Income Tax Rate if Turnover < ₹400 Crore	Income Tax Rate if Turnover > ₹400 Crore	Surcharge	Health & Education Cess
Up to ₹1 crore	25%	30%	Nil	4%
Above ₹1 crore but up to ₹10 crore	₹25,00,000 + 25%	₹3,00,000 + 30%	7%	4%
Above ₹10 crore	₹2,50,00,000 + 25%	₹3,00,00,000 + 30%	12%	4%

Income Tax Rate for Domestic Manufacturing Companies for AY 2025-26

Private limited companies that are domestic manufacturing companies have special tax rates under different sections of the Income Tax Act for AY 2025-26.

Domestic Manufacturing Companies	Particulars	Tax Rate	Surcharge	Health & Education Cess
Certain Domestic Manufacturing Companies (w.e.f. 2017-18)	Opted for Section 115BA	25%	–	–
All Existing Domestic Companies (any date of incorporation or activity)	Opted for Section 115BAA	22%	10% of taxable income if net income > ₹1 crore	4% of Income Tax + Surcharge
All New Domestic Manufacturing Companies	Opted for Section 115BAB	15%	10% of taxable income if net income > ₹1 crore	4% of Income Tax + Surcharge

Companies opting for concessional regimes (Section 115BAA / 115BAB) pay a flat 10% surcharge irrespective of income and are generally exempt from MAT (Minimum Alternate Tax).

Income Tax Rate for Foreign Companies

Foreign companies in India have a fixed tax rate of 40% on total income. In addition:

• Cess: 4% of total income tax + surcharge
  
• Surcharge:
  
  • 2% if net income > ₹1 crore but ≤ ₹10 crore
    
  • 5% if net income > ₹10 crore

Minimum Alternate Tax (MAT) for Companies

Some companies reduce their tax liability using exemptions, deductions, or depreciation. In some cases, companies show zero taxable income even after making profits and paying dividends.

To ensure these “zero-tax paying companies” contribute to taxes, the Minimum Alternate Tax (MAT) was introduced.

• MAT Rate for AY 2025-26: 15% on book profit

Which Concessional Tax Regime Should Your Domestic Company Opt for: Section 115BAA or 115BAB? 2

For AY 2025-26, the income tax rate for domestic companies depends on the turnover/gross receipts during the previous financial year (FY 2020-21) and the tax section opted by the company.

Condition	Income Tax Rate (excluding surcharge & cess)
Total turnover or gross receipts ≤ ₹400 crores	25%
If you opt for Section 115BA	25%
If you opt for Section 115BAA	22%
If you opt for Section 115BAB	15%
Any other domestic company	30%

Comparative View: Which Tax Regime Makes Sense (Old vs 115BAA vs 115BAB vs Standard)

Choosing the right tax regime can significantly affect your company’s tax liability and cash flow. This section helps you understand the differences and decide which regime is suitable.

1. Effective Tax Rates (Including Surcharge & Cess)

This table shows the overall tax rates under different regimes, including surcharge and health & education cess, so you can compare them effectively.

Regime	Base Tax Rate	Surcharge	Health & Education Cess	Effective Tax Rate Approx.
Old Regime (Standard)	30%	7–12% depending on income	4%	~31–34%
Section 115BAA	22%	10% if income > ₹1 Cr	4%	~25.17%
Section 115BAB (New Manufacturing)	15%	10% if income > ₹1 Cr	4%	~17.16%
Section 115BA	25%	–	4%	~26%

2. Sample Illustrations

Here are simple examples showing how different profit levels are taxed under each regime. This helps in understanding the practical impact.

• Small Profit (₹50 lakh): 115BAB may give the lowest tax if eligible
  
• Medium Profit (₹5 Cr): 115BAA is often more beneficial than the old regime
  
• Large Profit (₹50 Cr): 115BAA or 115BAB can reduce tax significantly compared to the standard 30%

3. Allowances & Deductions Foregone

Each tax regime affects the deductions and exemptions your company can claim. Understanding this is key to making the right choice.

• Concessional regimes (115BAA, 115BAB): Some deductions, exemptions, and incentives under the old regime are not available.
  
• Old regime: Can claim full deductions, depreciation, and incentives, which may be beneficial for companies with heavy investments or losses carried forward.

4. When to Choose Which Regime

Choosing the right regime depends on your company’s profit, deductions, and long-term plans.

• Old regime: Better if your company relies on deductions, exemptions, or has carry-forward losses.
  
• 115BAA: Suitable for existing companies with moderate profits, seeking lower tax and fewer compliances.
  
• 115BAB: Optimal for new manufacturing companies with high profits and low deductions, as it offers the lowest tax rate.

5. Transitional Issues & Lock-in

Switching tax regimes has long-term implications. Knowing the rules prevents surprises.

• Once a company opts for 115BAA or 115BAB, it cannot revert to the old regime for that financial year.
  
• Careful analysis is required before switching, especially if the company expects large deductions or exemptions in the near future.

How a Private Limited Company Elects a Tax Regime & Complies?

Electing the right tax regime is a key decision for private limited companies, as it affects tax liability, eligibility for deductions, and compliance with other statutory requirements. This section explains the process, timelines, and precautions for smooth compliance.

1. Time & Manner of Exercising Option

A company must formally declare the tax regime it chooses for a financial year:

• The option is exercised while filing the Income Tax Return (ITR) for that year.
  
• Companies generally use Form ITR-6 to declare the chosen regime.
  
• If a company is newly incorporated or switching regimes, it must mention the section opted (115BAA, 115BAB, etc.) in the return.
  

Important: The choice cannot be made outside the return filing; it must be documented in ITR.

Example: A company with FY 2025-26 profits of ₹5 crore can choose 115BAA while filing its ITR-6 due by 30 September 2025.

2. When the Option Has to Be Declared

The declaration of the chosen tax regime is mandatory in the Income Tax Return of the relevant financial year:

• Due Date: Typically 30 September of the assessment year for companies not requiring an audit under Section 44AB; otherwise, 30 November.
  
• The option is binding for that year, so companies must analyze which regime gives the maximum tax benefit.
  
• Late declaration may result in default taxation under the old regime.

3. Conditions & Restrictions for Switching Regime

Switching regimes has legal restrictions to prevent misuse:

• Once a company opts for 115BAA or 115BAB, it cannot revert to the old regime for that financial year.
  
• Companies must satisfy eligibility conditions, e.g.,
  
  • 115BAA: Existing domestic companies with no disqualifying business activities.
    
  • 115BAB: New domestic manufacturing companies with production-based criteria.
    
• Losses carried forward under the old regime may not be fully available in the concessional regime.
  

Depreciation and deductions: Certain allowances and exemptions under the old regime are foregone under concessional regimes.

Tip: Always run a tax simulation for both regimes before finalizing the option.

4. Compliance Pitfalls & Checklist

Companies should maintain proper records to avoid penalties and scrutiny:

• Maintain accurate books of accounts reflecting income and deductions.
  
• Document all board resolutions and approvals related to opting for a concessional regime.
  
• Ensure financial statements, notes, and disclosures reflect the chosen regime.
  
• Verify tax calculations, including surcharge, cess, and MAT obligations.
  
• Keep a checklist of all deductions foregone to understand opportunity costs.

Common Pitfall: Not updating the ITR form correctly or misreporting the section opted may lead to reassessment and penalty.

5. Impact on Other Compliances

The chosen tax regime affects multiple statutory obligations beyond income tax:

• GST: Profit levels affect input tax credit planning and GST payments. Reduced taxable income may impact GST strategies.
  
• ROC Filings: Annual returns (Form MGT-7) and financial statements (Form AOC-4) must match income and tax figures declared in ITR.
  
• Dividend Distribution & MAT: Switching regimes can change Minimum Alternate Tax (MAT) liability, which in turn affects distributable profits for dividends.
  
• Loan Covenants & Investor Reporting: Some investors or lenders may require disclosure of the tax regime opted for, as it affects net profits and compliance metrics.

Best Practice: Maintain a compliance calendar noting ITR due dates, board approvals, and ROC filing deadlines.

Conclusion

Understanding corporate tax rates and the various tax regimes is essential for private limited companies in India. Choosing the right regime, whether the old standard system, Section 115BAA, or 115BAB, can significantly impact your tax liability, cash flow, and long-term financial planning. Staying updated on surcharge, cess, and Minimum Alternate Tax (MAT) ensures that your company remains compliant and avoids unnecessary penalties.

Careful evaluation of your company’s profits, deductions, and eligibility for concessional regimes helps in making informed decisions. While concessional regimes may offer lower tax rates, companies must also consider foregone exemptions and lock-in restrictions. Conducting tax simulations and reviewing financial statements before opting for any regime can optimize savings and simplify compliance.

For businesses seeking expert guidance on corporate tax planning, regime selection, or compliance, RegisterKaro can help. Our team of professionals provides end-to-end support, from calculating your tax liability to filing returns accurately and on time, ensuring your company stays fully compliant with Indian tax laws. Contact RegisterKaro today!

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Frequently Asked Questions (FAQs)

1. What tax rate applies to private limited companies in India for 2025?

The private limited company tax rate in India for FY 2024–25 depends on the company’s turnover and the tax regime opted for. Domestic companies can choose the standard 30% rate or concessional regimes under Sections 115BAA (22%) and 115BAB (15% for new manufacturing companies). Surcharge and health & education cess apply on top of the base tax.

2. How do authorities calculate the income tax rate for a private limited company?

The income tax rate for a private limited company is based on net taxable income after deductions. Companies with turnover below ₹400 crore can opt for concessional rates under 115BAA or 115BAB. Foreign companies are taxed at a flat 40% with applicable surcharge and cess. MAT may also apply to ensure minimum tax payment.

3. What standard income tax rate applies to a private limited company?

For domestic companies not opting for concessional regimes, the standard income tax rate on a private limited company is 30%. A surcharge (7–12%) and a 4% health & education cess are added, depending on total income. This standard rate applies to companies with higher turnover and those not eligible for 115BAA or 115BAB.

4. What factors affect the tax rate on a private limited company?

The tax rate on a private limited company depends on factors like turnover, type of business, eligibility for concessional regimes, and whether it is domestic or foreign. Profit levels determine surcharge, and MAT ensures a minimum tax even when exemptions or deductions reduce taxable income.

5. How does the private limited company tax rate differ for new manufacturing companies?

New domestic manufacturing companies can benefit from Section 115BAB, with a private limited company tax rate of 15% on net income. A 10% surcharge applies if income exceeds ₹1 crore, plus 4% health & education cess. This regime encourages investment in manufacturing while offering the lowest corporate tax rates.

6. Are there different tax rates for domestic and foreign private limited companies?

Yes, domestic private limited companies have concessional options, while foreign companies face a flat 40% income tax rate. Foreign companies also pay a surcharge (2–5%) and 4% cess. Domestic companies can reduce tax under 115BAA/115BAB, while foreign firms have limited options.

7. What role does Minimum Alternate Tax (MAT) play for private limited companies?

MAT ensures private limited companies with high book profits pay a minimum tax of 15% on book profit. Even if exemptions or deductions reduce taxable income, MAT ensures the company contributes to tax revenue. It affects dividend distribution and cash flow planning.

8. How does the income tax rate for a private limited company turnover above ₹400 crore differ?

The government generally taxes companies with turnover above ₹400 crore at 30% under the old regime, adds a 7–12% surcharge depending on income, and applies a 4% health and education cess. Concessional regimes like 115BAA or 115BAB may not apply to high-turnover firms.

9. Can a private limited company switch between tax regimes?

Yes, companies can choose between the old regime, 115BAA, or 115BAB while filing ITR. Once chosen, the option is binding for the financial year. Switching requires careful evaluation of profits, deductions, and long-term planning to avoid losing eligible exemptions.

10. What effective tax rate do private limited companies pay under Section 115BAA?

Under Section 115BAA, the base tax rate is 22%, with a 10% surcharge if income exceeds ₹1 crore, plus 4% health & education cess. The effective tax rate approximates 25.17%, making it beneficial for existing domestic companies with moderate profits.

11. Which compliance requirements must private limited companies follow for corporate tax?

Private limited companies must file ITR-6 or ITR-7, maintain accurate books, and report board approvals when opting for concessional regimes. Compliance ensures the avoidance of penalties and alignment of financial statements with ROC filings.

12. How do surcharges and cess impact the private limited company corporate tax rate?

Surcharge increases tax liability based on income levels (7–12% for domestic, 2–5% for foreign), while health & education cess adds 4% to the total tax plus surcharge. These additional levies impact effective tax rates and overall corporate planning.

13. Is there a rebate or relief available for private limited companies?

Domestic private limited companies with total income below ₹1 crore can avail a rebate under Section 87A, reducing income tax liability. Marginal relief ensures companies crossing surcharge thresholds don’t pay disproportionately high taxes.

14. What should startups consider about the tax rate on private limited companies?

Startups should evaluate concessional regimes (115BAA/115BAB) for lower rates and simpler compliance. While concessional rates reduce taxes, they forgo certain deductions, so startups must simulate tax liability before deciding the optimal regime.

15. Who can help businesses with private limited company income tax planning?

Expert guidance is available from professionals like RegisterKaro, who assist in choosing the right tax regime, calculating liability, and filing ITR accurately. Professional support ensures compliance with corporate tax laws while optimizing savings.