A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at state or local levels. The taxes may also be referred to as income tax or capital tax. A country’s corporate tax may apply to:
- corporations incorporated in the country,
- corporations doing business in the country on income from that country,
- foreign corporations who have a permanent establishment in the country, or
- corporations deemed to be resident for tax purposes in the country.
Corporate tax or company tax can be assumed as an Income Tax for income earned by businesses. Many countries levy a corporate tax to smooth out the tax process for enterprises. Different countries have different rules that apply to taxing income.
Corporate Tax in India
Corporate tax in India is levied on both domestic as well as foreign companies. Like all individuals earning income are supposed to pay a tax on their income, business houses to are supposed to pay as tax a certain portion of their income earned. This tax is known as corporate tax, corporation tax, or company tax.
Definition of a Corporate
Any juristic person having a separate and independent legal entity from its shareholders is termed a corporate. The income earned by a company is computed and assessed separately from the dividends that it offers to its shareholders. These dividends do not figure out in the tax calculation of the company but are assessed as part of the income of shareholders.
For tax calculation, companies in India have been broadly divided into the following two categories.
- Domestic Corporate: Any company that is Indian is called a domestic company or if the company is foreign but the control and management are wholly situated in India then also it is termed as a domestic company. An Indian company means a company registered under the Companies Act 1956
- Foreign Corporate: Any foreign company is not of Indian origin and has some part of control and management of affairs located outside India
Corporate Tax Planning
Corporate tax planning is different from tax evasion or non-payment. Tax planning refers to the act of planning one’s finances in such a way that the payable tax amount is reduced while the gains are maximized. One of the most essential features of tax planning in that it is absolutely in line with the legal and financial rules set by the government of India.