Corporate Tax Rate in India For Five Assessment Years (AY 22-23 to AY 26-27)

India's corporate tax system is a cornerstone of national fiscal policy and a key factor in shaping the country's investment climate. The past ten years have seen a profound shift from a labyrinth of complex exemptions toward a clearer, more efficient framework aimed at boosting competitiveness and economic expansion. 

The timeframe spanning Assessment Years 2022-23 to 2026-27 marks a period of exceptional stability and deliberate policy direction. This era is anchored by the transformative 2019 reforms, which established a dual-tax system: a standard regime carrying forward older provisions and an optional alternative regime featuring substantially reduced rates, contingent upon the surrender of most deductions and incentives. 

The following overview presents a detailed, annual analysis of the prevailing tax rates, their associated conditions, and effective outcomes, serving as a comprehensive resource for strategic corporate planning over this five-year period. 

Key Note: 

Assessment Year (AY) is the year in which the income of the Previous Year (PY) is assessed and taxed. For example, income earned in FY 2021-22 is assessed in AY 2022-23 . 

The major structural change was introduced via the Taxation Laws (Amendment) Act, 2019 , which provided an optional lower tax regime for domestic companies. 

Surcharge and Health & Education Cess are applied on the tax amount. The rates below are basic tax rates . 

Key Conditions & Clarifications 

Optional New Tax Regimes (Sections 115BAA & 115BAB): 

• The choice to opt for either regime in a given year is irrevocable and applies to all subsequent years. 
• Companies under these regimes cannot claim specified tax deductions/incentives (e.g., under Sections 10AA, 32AD, 33AB) or carry forward losses from past years that are linked to such deductions. 
• Section 115BAA: Open to any domestic company that forgoes the specified deductions. 
• Section 115BAB: Available to new domestic manufacturing companies incorporated after October 1, 2019, that begin production by March 31, 2024. This offers the lowest tax rate of 15%. 

Surcharge and Cess

Surcharge: 

• Old/Default Regime: 7% (income > ₹1 Crore) or 12% (income > ₹10 Crores). 
• New Regimes (115BAA & 115BAB): A fixed 10% surcharge applies, irrespective of income level. 

Health & Education Cess:

A 4% cess is applied to the total of income tax and surcharge under all regimes.
 
Effective Tax Rate Comparison (Including Surcharge & Cess): 

• Old Regime (30% base rate, e.g., income of ₹50 Crores): ~33.38% (30% tax + 12% surcharge + 4% cess). 
• New Regime 115BAA (22% base rate): ~25.17% (22% tax + 10% surcharge + 4% cess). 
• New Regime 115BAB (15% base rate): ~17.16% (15% tax + 10% surcharge + 4% cess). 

Policy Stability: 

The corporate tax structure is set to remain stable from Assessment Year 2021-22 through 2026-27, providing long-term certainty for businesses. 

FAQs 

How to opt for Section 115BAA reduced tax rate? 

To avail of the 22% tax rate under Section 115BAA, a domestic company must irrevocably file Form No. 10-IC electronically before its income tax return deadline. This declaration commits the company to forgo specified deductions and most carried-forward losses, resulting in an effective tax rate of approximately 25.17% and exempting it from Minimum Alternate Tax (MAT) from that year onward. 

Differences between Section 115BAA and 115BAB regimes 

Corporate tax rates for foreign companies in India