Updated on November 19, 2024 04:54:20 PM
A business structure which is owned and operated by a small group of people for the purpose of earning profits and wealth creation is known as a Private Limited company. This type of company is held by shareholders, who are the ultimate owners of the business. All the registered private limited companies are governed by the Ministry of Corporate Affairs in India. In this article we will discuss the New Corporate tax rate for the FY 2023-2024.
Under the Companies Act, 2013, Every corporate or business is required to pay a Corporate Tax on the total income generated by the company. For the purpose of income Tax calculation, a company is categorised into two categories namely- Domestic company and foreign company.
Domestic companies which are registered under the Companies Act, 2013 have their business setup and management in India. A foreign company on the other hand can be registered outside India but it has Business operations in India.
The total corporate tax will be charged on the domestic company on the total income generated by it. In case of a foreign company the corporate tax will be charged on the net income generated within India only.
The income of corporations in India is subject to Corporate tax at the applicable tax rate after various deductions. The Income tax is charged after deductions such as depreciation, cost of goods sold, salaries and remuneration of employees and top management, administrative expenses etc.
Let's have a look at the sources of income for a private limited company, before calculating tax:
| Condition | Income Tax Rate (excluding surcharge and cess) |
|---|---|
| Turnover or Gross Receipt in previous year not exceed ₹ 400 crores | 25% |
| If opted for Section 115BA | 25% |
| If opted for Section 115 BAA | 22% |
| If opted for Section 115 BAB | 15% |
| Any other Domestic Company | 30% |
| Net Income Slab | Tax % | Surcharge |
|---|---|---|
| Upto 1 Crore | 25% | Nil |
| Between 1 Crore and 10 Crore | 25% | 7% |
| Above 10 Crore | 25% | 12% |
| Net Income Slab | Tax % | Surcharge |
|---|---|---|
| Upto 1 Crore | 30% | Nil |
| Between 1 Crore and 10 Crore | 30% | 7% |
| Above 10 Crore | 30% | 12% |
Tax Slab for AY 23-24
Health & Education Cess is fixed @4% on all income slabs.
Tax Rate for Foreign Companies is @ 40% fixed and Cess @ 4% on total income tax + surcharge.
There are various tax benefits for Private Limited Company in India which are given below:
Any salary given to the founder or director of the company is an expense to the company and income for the receiver. The profit is taken by the director in the profit sharing ratio as decided in the beginning. The director may receive profit as salary instead of dividend for tax saving purposes.
As per the rules mentioned in the articles of association of the company, a prescribed fee may be paid to the director of the company for holding board meetings.
Any amount incurred in paying the rent of the company can be used to avail tax benefit. The amount paid as rent is deducted from the gross income to calculate the net taxable income.
Depreciation is the reduction in the value of an asset over time, due to wear and tear. The decrease in value of an asset is shown as a loss on the balance sheet hence this will save the tax on assets of the company.
The payment of salaries to employees, board members is shown as an expense in the accounts of the company. So the payment made in salaries will be deducted from the gross income while calculating the taxable income.
The amount of money that is used in the office utilities and purchasing stationary is shown under the expense head in the accounts of the company, therefore such amount will also be deducted from the gross income to calculate the net taxable income.
With proper planning and research, a good amount of tax can be saved around 20% to 30% every year.
A private limited company is a separate legal entity that is created as a separate entity from its shareholders and has perpetual existence. There are various mandatory compliances that need to be done annually in any private limited company.
Among various obligations, a private limited company is liable to pay corporate tax on net taxable income as a mandatory obligation to the company.
The general tax slab of a private limited company is 30% of the net taxable income after deducting all the expenses.
The new income tax slab for Corporate Tax for FY 2023 is 30%.
Surcharge is an additional charge levied for persons earning income above the specified limits.
Corporate tax is a Direct tax that is applicable to the companies generating profits. A corporate tax is levied on the net income after deducting expenses from the gross income.
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