How are Corporate Profits Taxed in India?

MAT is another important concept in corporate taxation. It is intended to ensure that certain companies with substantial book profits but lower taxable income under normal provisions pay a minimum level of tax.

The general MAT rate for applicable companies is 15% of book profit, plus applicable surcharge and cess. However, companies opting for Sections 115BAA and 115BAB are exempt from MAT.

Advance tax is also relevant. Companies generally pay their estimated tax liability in instalments during the financial year rather than waiting until the end of the year.

One important point is that the basic corporate tax rate is not always the final tax payable. Surcharge and Health and Education Cess may also apply.

For example, under the rates published for Assessment Year 2026–27, a domestic company opting for Section 115BAA has a 22% basic tax rate, with a 10% surcharge and 4% cess on tax plus surcharge. The effective rate is 25.17%.

Companies should also check whether they qualify for the selected regime because some deductions and exemptions are restricted under concessional tax options.

Corporate income tax is the tax a company pays on its taxable profits. It is different from the income tax paid by individuals on salary, business income or other personal earnings.

In India, the applicable rate depends on the company's classification and whether it qualifies for a concessional tax regime. Domestic companies may be eligible for different rates under provisions such as Sections 115BA, 115BAA and 115BAB. Companies that do not qualify for these options may be taxed at the standard applicable rate.

The tax calculation also considers eligible deductions, expenses, exemptions and adjustments under the relevant tax provisions.