The Union Budget 2018 was announced on February 1 after much expectations in the run-up. The ease of doing business ranking of India as per the World Bank has improved considerably this past year and India looks well placed for further progress economically. The Finance Minister Arun Jaitley announced significant measures for the agriculture sector and the healthcare sector. There were no major changes in the income tax rates for individuals. However,  there was a significant change made to taxation in business. The changes were intended to benefit mid-sized companies with the goal being to help them grow and propel the economy further on the path of growth. They might even be considered the biggest beneficiary of the Budget. Below is a discussion on the rate of income tax on companies:

A) Tax on domestic companies

Category of company with rate of tax

1. Domestic Companies with turnover of upto INR 250 crores (increased from 50 Crores) during the F. Y. 2016-2017 - 25%

2. Domestic Companies with turnover of above INR 250 crores in the F.Y. 2016-2017- 30%

3. Start-ups Registered from 01-04-2016 to 31-03-2021 with turnover not exceeding 25 Crores in 7 years from the date of Incorporation and [Section 80 IAC] 0% – For any 3 consecutive years out of first 5 years [MAT applicable under 115JB]

B) Other non-domestic companies

(1) On so much of the total income as consists of:

(a) Royalties received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 31st day of March, 1961 but before the 1st day of April, 1976; or  50%

(b) Fees for rendering technical services received from Government or an Indian concern in pursuance of an agreement made by it with the Government or the Indian concern after the 29th day of February, 1964 but before the 1st day of April, 1976; and where such agreement has, in either case, been approved by the Central Government

(2) On the balance, if any, of the total income – 40 %

 C) Rate of surcharge

1. On Domestic company

• Total Income up to 1 crore – NIL
• Total Income > 1 crore and up to 10 crores – 7 %
• Total Income > 10 crores – 12 %

2. Other companies

• Total Income upto 1 crore – NIL
• Total Income > 1 crore and up to 10 crores – 2 %
• Total Income > 10 crores – 5 %

D) Education cess – 4% of the Income Tax & Surcharge (increased from 3% previously)

E) Minimum alternate tax (M.A.T.) -  Applicable where the Book Profits are more than Profits as per Income Tax Act, 1061.

a) The rate of tax under MAT shall not be less than 18.50% of the Book Profits;

b) The tax paid under MAT which is in excess of the actual Tax on Total Income is allowed to be carried forward as tax credit under MAT for a period upto 15 (Fifteen) years.

F) Dividend distribution tax (Sec 115 O) is 15% but in case of dividend referred to in Section 2 (22) (e) of the Income Tax Act, it has been increased from 15% to 30%.

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