Corporate Tax? Rates & Tax Liability, Benefits On Business Loans
Jan 22, 2023
Taxes in India are significant and can be paid by customers in several forms, such as income tax, wealth tax, or capital gains tax. Similarly, corporate entities—domestic and foreign—also need to pay various taxes to the Indian government, one of which is company tax or corporate tax.
Corporate tax is a kind of direct tax that businesses have to pay based on the profits they make within a certain period of time. The amount of corporate tax that businesses have to pay varies depending on how much profit they make. In most cases, corporate tax is levied on a company’s revenue after certain deductions are made, such as for COGS (cost of goods sold), depreciation, and SG&A (selling, general, and administrative expenses).
Businesses may be eligible for loans from banks or other financial institutions to help them fund their operations or make investments. Business loan eligibility is generally based on the creditworthiness of the business, which can be determined by factors such as the business’s credit score, financial history, and ability to repay the loan. Other factors that may affect a business’s loan eligibility include the type of business, the purpose of the loan, and the lender’s policies and requirements.
Corporate Tax In India
The Indian government collects corporate taxes from enterprises as a source of income. This includes the following types of income:
- Profit from selling goods and services
- Interest earned on investments
- Dividends received from other companies
- Royalties received for the use of intellectual property
Corporate Tax Rates FY 2022–23
|Range of income||Tax rate|
|Up to Rs 400 crore Gross Turnover||25%|
|Gross Turnover that exceeds Rs 400 crore||30%|
*Surcharge rates in addition to the rates above
|Particulars||Domestic Companies Tax rate|
|If the total income range is between Rs.1 crore and Rs.10 crore||7% as per the rate of tax above|
|If the total income range exceeds Rs.10 crore||12% as per the rate of tax above|
Benefits of business loan on Corporate Tax
Business loans can provide several benefits to a company, including the following:
- Access to capital: A business loan can provide the necessary funds to finance the growth and expansion of a business.
- Flexibility: Having a business loan eligibility means being eligible for a variety of purposes, like purchasing equipment, hiring new employees, or renovating a facility.
- Increased purchasing power: A business loan EMI can allow a company to make larger purchases that it may not have been able to afford otherwise.
- Improved cash flow: A small business loan can help a company manage its cash flow more effectively by providing a source of funding to cover expenses.
- Tax benefits: Applying for a business loan online may offer tax benefits, such as the ability to deduct the interest paid on the loan on the company’s tax return.
Tax Benefits For Companies
Corporate tax is a tax levied on the profits of a company. The tax benefits for companies through corporate tax can be significant, as it can reduce the overall tax bill for the company. In addition, corporate tax can also provide incentives for companies to invest and expand their businesses. Important benefits available to companies are discussed below.
MAT provisions are made inapplicable to certain foreign companies
Certain foreign companies are exempt from the provisions of the Multilateral Agreement on Investment (MAT). These companies are typically involved in activities deemed to be in the public interest, such as infrastructure development or natural resource extraction. The exemption from MAT provisions allows these companies to operate without complying with the agreement’s stringent rules and regulations.
A tax-free transfer of certain capital assets
A tax-free transfer of certain capital assets refers to the transfer of these assets between spouses or common-law partners or to a spouse or common-law partner from a deceased person. The transfer must be made due to a divorce or marriage dissolution, or the death of a spouse or common-law partner. To qualify for this tax-free transfer, the asset must have been acquired by the spouse or common-law partner on or before December 31, 2016.
Establishment/extension of a business expense deduction
The establishment or extension of a business expense deduction can provide significant tax relief for businesses as a small business loan. This deduction can be used to offset the cost of business expenses, such as inventory, equipment, and repairs. This small business loan can also be used to reduce the amount of taxable income for businesses.
A deduction based on the nature of the company’s business
A deduction based on the nature of the company’s business is a deduction the company can take on its taxes. This deduction is based on the fact that the company is in a certain business and can be used to offset the cost of doing business. This deduction can be a significant amount of money for a company and can be used to reduce the company’s tax liability.
There are several deductions specific to businesses making contributions to qualified organisations. These deductions are available through the corporate tax code and can be a significant way for businesses to reduce their tax liability.
The most common deduction is for charitable contributions. Businesses can deduct up to 10% of their taxable income for contributions made to qualified organisations. This deduction can be a great way for businesses to support the organisations that are important to them while also reducing their tax liability.
Another common deduction is for research and development expenses. Businesses can deduct up to 20% of their research and development expenses for qualified organisations.
Dividends received from certain firms are taxed at a reduced rate.
Dividends received from some firms are taxed at a reduced rate. This is because the government believes these companies are essential to the economy and need to encourage investment. The reduced tax rate helps to make these companies more attractive to investors.
In many cases, corporate tax can be the difference between a company being able to pay its debts and being forced into insolvency. By ensuring that a company pays its corporate tax, creditors can be confident that the company will be able to meet its financial obligations. This can help to avoid the need for insolvency proceedings, which can be costly and time-consuming.
Corporate tax can also be used to restructure a company’s finances. This can involve changing how the company is taxed, making it more efficient and sustainable in the long term.
It is important to ensure that you pay your taxes on time and are aware of the tax liabilities that you have. Tax is a major cost for businesses, and not paying taxes on time can have major consequences. It is always a good idea to talk to your accountant about the best course of action for your business.