Tax Laws and Practice · Classification and Tax Incidence on Companies

Tax Rates and Special Regimes for Companies under Income Tax

Q: What is the tax rate for a domestic company?

The normal base rate is 30%, with a lower rate if turnover in the specified earlier year stays within the ₹400 crore limit. A company can opt for the concessional regime at 22%. Surcharge and 4% cess are added on top; confirm the surcharge rates from the Finance Act, 2026.

Q: Is MAT applicable to a company in the concessional regime?

No. Section 206(1)(q)(ii) says MAT does not apply to a person who has exercised the option under section 200(5) or section 201(2). Some foreign companies are also outside MAT under section 206(1)(l).

Q: What is the MAT rate now?

For most companies it is 14% of book profit, substituted for 15% with effect from 1 April 2026. For an IFSC unit deriving income solely in convertible foreign exchange it is 9%.

Q: Can I carry forward MAT credit for MAT paid now?

Not for fresh MAT paid from 1 April 2026, because the earlier credit clauses were omitted. Credit under section 115JAA brought forward as on 31 March 2026 is dealt with under section 206(3) for a domestic company that opted for the concessional regime (set-off up to 25% of tax payable) and under section 206(4) for a foreign company (set-off when tax on total income exceeds MAT). The credit cannot go beyond the fifteenth tax year after the year it first became allowable. These sub-sections do not deal with a domestic company that has not opted in.

Updated 11 October 2026 · Fact-checked

Company tax is charged at a flat rate fixed by the Finance Act, not by slabs. A domestic company pays the normal rate or the lower concessional-regime rate if it opts in. A foreign company pays a higher rate. Add surcharge (if income is high) and 4% cess. Companies not opting in may also face MAT under section 206.

Understand Tax Rates and Special Regimes for Companies

A company is taxed at a flat rate on its total income. There are no slabs. The rate depends on what kind of company it is: domestic or foreign. It also depends on whether a domestic company has chosen a concessional regime.

The normal regime for a domestic company has a base rate of 30%, with a lower rate for companies whose turnover or gross receipts in the specified earlier year stay within the ₹400 crore limit. Under this regime the company keeps the usual deductions and incentives. A foreign company is taxed at a higher base rate of 35% on its India-sourced income, with special lower rates for certain incomes such as royalty and fees for technical services.

The concessional regime is an option. A domestic company that opts in pays a lower rate: 22% for most companies. In return it gives up specified deductions and incentives and cannot set off brought-forward losses attributable to them. A still lower rate of 15% has been available to new manufacturing companies, subject to conditions that include a time limit for starting manufacturing. This page does not confirm whether that rate is still open, so check its current status and conditions in the Income-tax Act, 2025 and your ICSI study material. Section 206 refers to an option exercised under section 200(5) or section 201(2). It does not set out the rates or conditions of those options, so take those from the sections themselves.

Then add surcharge and health and education cess. Surcharge applies only when income crosses limits fixed by the Finance Act. The surcharge rates and bands in this page are indicative figures and are not taken from the text of section 206. Confirm them against the Finance Act, 2026 (First Schedule) and your study material before using them in an answer. Commonly quoted figures: for a domestic company in the normal regime, 7% for income above ₹1 crore up to ₹10 crore and 12% above ₹10 crore; for a company in the concessional regime, a flat 10%; for a foreign company, 2% and 5% on the same bands as the normal regime. Cess is 4% on tax plus surcharge. Marginal relief stops the tax after surcharge from exceeding the tax at the threshold by more than the extra income.

Finally, MAT is a minimum tax. Under section 206(1), if the tax on total income is less than the minimum alternate tax, the book profit is treated as total income and tax equals MAT. MAT is computed at 14% of book profit for most companies (the rate was 15% before it was substituted with effect from 1 April 2026) and 9% for an IFSC unit earning solely in convertible foreign exchange.

MAT does not apply to a person who has exercised the option under section 200(5) or section 201(2), so it does not apply to a company that has opted for the concessional regime (section 206(1)(q)). MAT also does not apply to certain foreign companies under section 206(1)(l). For example, a foreign company that is resident in a treaty country and has no permanent establishment in India is outside MAT.

Fresh MAT credit is no longer given for MAT paid from 1 April 2026. Credit under section 115JAA of the 1961 Act that was brought forward as on 31 March 2026 is dealt with in two places. Section 206(3) covers a domestic company that has exercised the concessional option: it can set off the old credit up to 25% of the tax payable on its total income each year. Section 206(4) covers a foreign company: it can set off the old credit when tax on total income exceeds MAT, to the extent of the difference. In both cases the credit cannot be carried beyond the fifteenth tax year after the year it first became allowable under section 115JAA. Section 206(3) and (4) do not deal with a domestic company that has not opted for the concessional regime, so do not apply them to such a company.

Key rules to remember

Tax on total income: Tax = Total income × applicable company rate; Flat rate, no slabs. Check which regime the company is in before choosing the rate.
Total tax liability: Tax payable = (Tax + Surcharge) + Cess at 4%; Cess is on tax plus surcharge. Surcharge is added only when income crosses the threshold.
Normal domestic company rates: Base 30% (lower rate for companies within the ₹400 crore turnover limit); indicative surcharge 7% if income > ₹1 crore up to ₹10 crore, 12% if > ₹10 crore; The surcharge figures are indicative and not from section 206. Confirm them against the Finance Act, 2026 and your study material. Marginal relief applies near each threshold.
Concessional regime: 22% + indicative surcharge 10% flat (if income exceeds the threshold) + cess 4%; Confirm the surcharge rate and threshold against the Finance Act, 2026. If the surcharge is 10%, the effective rate is 22% × 1.10 × 1.04 = 25.168%. Without surcharge: 22% × 1.04 = 22.88%.
Foreign company: Base 35%; indicative surcharge 2% if income > ₹1 crore up to ₹10 crore, 5% above ₹10 crore; cess 4%; Surcharge figures are indicative; confirm them against the Finance Act, 2026. Special lower rates apply to certain incomes such as royalty and fees for technical services.
MAT, section 206(1): If tax on total income < 14% × book profit, tax payable = 14% × book profit; IFSC unit earning solely in convertible foreign exchange: 9%. Book profit is deemed to be total income for this purpose. Section 206(1)(l) exempts certain foreign companies, for example a treaty-country resident with no permanent establishment in India.
MAT credit: No fresh credit for MAT paid from 1 April 2026; The earlier credit clauses of section 206(1) were omitted from 1 April 2026. Credit under section 115JAA brought forward as on 31 March 2026 is dealt with under section 206(3) for a domestic company that opted for the concessional regime and under section 206(4) for a foreign company.
Use of old credit by a domestic company that opted for the concessional regime: Set-off each year ≤ 25% of tax payable on total income; Section 206(3)(b). The credit cannot be carried beyond the fifteenth tax year after the year it first became allowable under section 115JAA.
Use of old credit by a foreign company: Set-off in a year = up to (tax on total income − MAT), only when tax on total income exceeds MAT; Section 206(4)(b). The same fifteenth-tax-year limit applies.
Alternate minimum tax (non-company): AMT = 18.5% × adjusted total income (co-operative society 15%; IFSC unit 9%); Section 206(2). It applies only to persons other than companies who claim specified deductions.

How to solve Tax Rates and Special Regimes for Companies questions

Use the same sequence for every question on company tax rates. Write the status first, then compute. Marks usually follow the steps.

1Identify the company: domestic or foreign, and whether it is an IFSC unit.
2Check whether a concessional regime option was exercised. If it was, use the concessional rate and do not apply MAT.
3If it is a normal-regime domestic company, pick the correct base rate from the turnover condition given in the question.
4Compute tax on total income at the flat rate.
5Compute the surcharge by checking total income against the thresholds. Apply marginal relief if the question is close to a threshold.
6Add cess at 4% on tax plus surcharge.
7If the company is not in the concessional regime, compare the tax with MAT under section 206(1) and take the higher amount.
8State the conclusion in a sentence with the section reference where it matters.

Quickest way: Rate-multiplier shortcut

When to use it: Use it when a question gives total income and asks for total tax in a single regime and no marginal-relief issue arises.

Fix the base rate for the company's status and regime.
Multiply by (1 + surcharge rate) if the income crosses the threshold; otherwise use 1. Use the surcharge rate given in the question or confirmed from the Finance Act.
Multiply by 1.04 for cess.
Multiply the result by total income. Example (assuming a 10% surcharge applies): 22% regime gives 0.22 × 1.10 × 1.04 = 25.168%.
For non-opting companies, quickly compare with 14% of book profit.

Common mistakes in Tax Rates and Special Regimes for Companies

Applying slab rates to a company.
Students carry over the rules for individuals.
Fix: State at the start that a company pays a flat rate. Slabs do not apply.
Charging surcharge on companies with income below the threshold.
Students treat surcharge as automatic.
Fix: Check the income limit first. Take the surcharge rates and thresholds from the question or confirm them from the Finance Act, 2026 and your study material.
Computing cess on tax alone, not on tax plus surcharge.
The order of calculation is forgotten.
Fix: Add surcharge to tax first, then multiply by 4%.
Applying MAT to a company that has opted for the concessional regime.
Students assume MAT is universal for companies.
Fix: Section 206(1)(q)(ii) excludes a person who has exercised the option under section 200(5) or section 201(2).
Applying MAT to every foreign company.
Students remember MAT only as a domestic company rule or assume it covers all companies.
Fix: Check section 206(1)(l). For example, a foreign company resident in a treaty country with no permanent establishment in India is outside MAT.
Giving MAT credit for MAT paid in tax year 2026-27 or later.
Old textbooks and notes treat MAT credit as available for 15 years.
Fix: The credit clauses were omitted from 1 April 2026. Only credit under section 115JAA brought forward as on 31 March 2026 is dealt with, under section 206(3) for a domestic company that opted for the concessional regime and section 206(4) for a foreign company.
Using the old 15% MAT rate.
Outdated notes.
Fix: Use 14% of book profit for most companies, 9% for an IFSC unit earning solely in convertible foreign exchange.

Worked examples

Example 1

A domestic company opts for the concessional regime at 22%. Its total income is ₹50,00,000. Compute its tax liability. Ignore MAT and marginal relief.

Show the solution

The company has opted for the concessional regime, so the rate is 22% and MAT does not apply.
Tax = 22% × ₹50,00,000 = ₹11,00,000.
Surcharge: income does not exceed ₹1 crore, so surcharge is nil.
Cess = 4% × ₹11,00,000 = ₹44,000.
Total tax = ₹11,00,000 + ₹44,000 = ₹11,44,000.

Answer: Tax liability is ₹11,44,000.

Example 2

A domestic company in the normal regime has total income of ₹60,00,000 under normal provisions and book profit of ₹2,00,00,000 computed under section 206. Take the tax on total income at 30% and ignore surcharge and cess. Find the tax payable and say whether any MAT credit arises for tax year 2026-27.

Show the solution

Tax on total income = 30% × ₹60,00,000 = ₹18,00,000.
MAT = 14% × ₹2,00,00,000 = ₹28,00,000.
Tax on total income (₹18,00,000) is less than MAT (₹28,00,000), so section 206(1)(a) applies.
Book profit is deemed to be total income and the company pays tax equal to MAT, i.e. ₹28,00,000.
Excess over normal tax = ₹28,00,000 − ₹18,00,000 = ₹10,00,000.
The earlier credit clauses of section 206(1) were omitted from 1 April 2026, so no fresh credit arises for this excess.

Answer: Tax payable is ₹28,00,000. The ₹10,00,000 excess does not generate MAT credit for tax year 2026-27.

Exam tips

Begin every answer with the company's status and regime. It signals the right rate to the examiner.
Show surcharge and cess as separate lines so partial marks are secured.
Use the updated MAT facts: 14% rate, and the omission of fresh credit from 1 April 2026. Notes from older years may contradict them.
When both MAT and the concessional regime appear, state the exclusion in section 206(1)(q)(ii) in one sentence.
Quote the Income-tax Act, 2025, and never the 1961 Act, for June 2027 answers.

Practice questions from Classification and Tax Incidence on Companies

Tax Rates and Special Regimes for Companies in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CS ProfessionalTax Rates and Tax Liability of Companies

Tax Rates and Special Regimes for Companies: frequently asked questions

What is the tax rate for a domestic company?

The normal base rate is 30%, with a lower rate if turnover in the specified earlier year stays within the ₹400 crore limit. A company can opt for the concessional regime at 22%. Surcharge and 4% cess are added on top; confirm the surcharge rates from the Finance Act, 2026.

Is MAT applicable to a company in the concessional regime?

No. Section 206(1)(q)(ii) says MAT does not apply to a person who has exercised the option under section 200(5) or section 201(2). Some foreign companies are also outside MAT under section 206(1)(l).

What is the MAT rate now?

For most companies it is 14% of book profit, substituted for 15% with effect from 1 April 2026. For an IFSC unit deriving income solely in convertible foreign exchange it is 9%.

Can I carry forward MAT credit for MAT paid now?

Not for fresh MAT paid from 1 April 2026, because the earlier credit clauses were omitted. Credit under section 115JAA brought forward as on 31 March 2026 is dealt with under section 206(3) for a domestic company that opted for the concessional regime (set-off up to 25% of tax payable) and under section 206(4) for a foreign company (set-off when tax on total income exceeds MAT). The credit cannot go beyond the fifteenth tax year after the year it first became allowable. These sub-sections do not deal with a domestic company that has not opted in.