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taxation > Direct taxes

Corporate Taxes

An entity incorporated in India or having its entire management and control in India is a resident and is taxed on its worldwide income. A non-resident corporation (foreign company) is taxed only on income derived in India from Indian Operations, income that is deemed to arise in India and income that is received in India.The tax year runs from April 1 to March 31. The tax rate differs on the basis of category of the Company like Domestic and Foreign.

Minimum alternate tax (MAT)

MAT is leviable as a percent of book profits of the companies which has incurred loss for the year under review. The profits from software and goods exports and from exports of film, television, music or television news software, including telecast rights is not considered as part of book profits for the purposes of MAT. MAT is not allowed as credit against future normal tax payable.

Dividends distribution tax

Any dividend distributed by a Company to its shareholders is not taxable in the hands of Shareholders. On such dividend s, the Company will have to pay dividend tax under section 115 O of the act.

Residential status and tax liability

Under the Income- tax Act, 1961 ('Act') a resident is called up on to pay tax on his global income though he does not get relief against double taxation. A non-resident, on the contrary, is required to pay tax only on his Indian income unless he commits the 'indiscretion' of receiving his foreign income in India. For, income received in India is taxable in any case. There are basically two mutually exclusive tests for determining one's residential status whereas for individuals the accent is on 'minimum period of stay in the country', for others the test boils down to the situation of 'control and management of affairs'. A foreign company scores over other foreign entities in this regard. While a part control in India is enough for all others, a foreign company becomes a resident only if the control and management of affairs is situated wholly in India otherwise normally presumed to be a non-resident. The ensuing discussion proceeds on the twin assumption that the foreign collaborator is a company and the control and management of its affairs is not wholly situated in India.


Dividends can be paid only out of the profits of a year, undistributed profits of previous years. Dividends received in India can be repatriated subject to compliance of exchange control formalities.
Now under section 205(1A) of the Companies Act 1956 Act the 'interim dividend' also can be declared in the middle of a financial year and has the same status of the final dividend. Because of this, once declared by the Board interim dividend cannot be rescinded later and the declared interim dividend has to be paid to the shareholders. Company can declare and pay the dividend to the shareholders subject to complying with the Companies (Transfer of Profits to Reserves) Rules, 1975.

Withholding Tax in India

Withholding of tax is required from all payments chargeable to tax made to non- resident at rates specified under the domestic law treaty.


We invite you to browse our website for withholding tax in India . To learn more on withholding tax in India & for any queries contact us at .

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