Last partial update, July 2017
India Tax Rates
- The tax in India on an individual's income is progressive from 5% to 30% for 2017. An education tax (CESS) of 3% is imposed too. There is a 15% surtax for income exceeding INR 10 million.
- A limited company in India is liable for tax in 2017 at the rate of 30% for a local company and 40% for a foreign company with the addition of surcharge (for income above INR 10 millions, 7% for domestic companies, 2% for foreign companies) as well as an education tax (CESS) of 3%.
When income exceeds INR 100 million the surcharge is 12% for domestic companies and 5% for foreign companies.
The top effective tax rate in India is 34.608% for a local company and 43.26% for a foreign company.
- Companies in India whose tax liability is less than 18.5% of the "book profits" pay a 18.5% minimum alternative tax, MAT on the "book profits" with a surcharge and CESS, bringing the effective tax rate of 20.01% for domestic companies and 19.44% for foreign companies.
India Capital Gains
Capital gains for companies and individuals in India are divided into 2 groups, long term capital gains and short term capital gain.
- Long term capital gains relate to the sale of an asset that has been held for 3 years or longer (on the sale of listed securities on the Indian Stock Exchange, shares that have been held for over a year, or for unlisted shares being held for more than two years).
When the asset has been held for a shorter period than that defined as long term, the capital gain is deemed to be a short term gain.
- The long term tax rate is 20% for assets, For purposes of calculation, the cost is adjusted to the increase in the Index and deducted from the proceeds.
- Capital gains from the sale of long term negotiable securities on the Indian Stock Exchange are tax exempt when the sale is subject to Securities Transaction Tax , otherwise they are taxed at 10%.
- A short term capital gain is added to regular income. At the same time a capital gain on the sale of negotiable securities on the Stock Exchange which is subject to Securities Transaction Tax is taxed at 15% for individuals and companies.
Table of Income Tax Rates in India for an Individual 2017.
||1 – 250,000
||1,000,001 and above
- There is an "Education tax" (CESS) of 3%.
- An additional 15% surtax on the tax payable is imposed on income exceeding INR 10 million.
India Overseas Income
- An individual and company who are Indian residents are also taxed on their income outside India and receive a credit for overseas taxes
- Qualification for residence for an individual:
residence in India of at least 182 days in the tax year,
or: residence in India at least 60 days in the tax year and at least 365 days in the 4 previous years.
- An Indian resident is also taxed on his income overseas.
India Reporting Dates and Payment
- The tax year in India begins on April 1 and ends on March 31.
- An individual whose income is from a business must submit an annual return by October 31. There is a fine of 10% of the tax payable for each month's delay.
- An individual whose income is from a wage or whose income is subject to a deduction of tax at source, is exempt from submitting an annual return.
- An advance payment must be made on 3 dates - September 15, December 15 and March 15.
- There is an official body in India that deals with the subject of pre-ruling in connection with tax problems that are presented for discussion.
India Deduction of Tax at Source
Taxation of Employees
- An employer is obligated to deduct tax at source on a monthly basis from a salaried employee and to make additional contributions to a provident fund and insurance.
- The Indian employer's contribution to provident fund is 12% in general.
Employees pay to provident funds 12% of their salary.
India Other deductions
The following payments to non-residents are subject, in India, to a deduction of tax at source (rates are before surcharge and cess):
- Dividend - 0%.
- Interest - 20%. (Before surcharge and cess).
- Royalties - 10% (Before surcharge and cess).
- Technical Fees - 10% (Before surcharge and cess).
Comments: The deduction at source for payments to foreign residents is subject to the Double Tax Prevention Treaty to which India is a signatory.