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India Increases Minimum Alternate Tax (MAT) Rates

India has increased the Minimum Alternate Tax (MAT) rate from 15% to 18% of book profits. Foreign companies with income sources in India may be liable to MAT and required to maintain book of accounts. This is irrespective of whether the overseas companies have a permanent establishment within the country.

Companies need to assess the impact of the minimum alternative tax on their taxable income if they are undertaking projects in India or have branches in India.

Tax Rate for Foreign companies

There is no change in tax rate for foreign companies. The effective tax rate for foreign companies remains at 42.23% for companies with income above INR. 10,000,000 and 41.2% for other foreign companies.

Tax Revision Eases Burden on Employees in Indian Operations

India’s individual taxpayers from the lower and mid income groups can expect a windfall thanks to a widening of tax slabs. The maximum marginal rate of tax has been maintained at 30%. The income slabs are revised upwards, effectively reducing the tax burden e.g. the tax burden for income of INR. 1,000,000 will be lower by INR. 51,500 from year 2010-11.

  • *Financial year starting from April 1 and ending on March 31
  • The first income slab for women and senior citizens (above 65 years of age) are INR 190,000 and INR 240,000 respectively i.e. no tax up to INR 190,000 for women and up to INR 240,000 for senior citizens. Other slabs being adjusted accordingly.
  • The rates include education cess of 3% on the base tax rates.

Tax Rate for Foreign Companies

There is no change in tax rate for foreign companies. The effective tax rate for foreign companies remains at 42.23% for companies with income above INR. 10,000,000 and 41.2% for other foreign companies.

Tax Rate for Domestic Corporations

There is no change in tax rate for domestic companies. However, the surcharge on domestic companies with income above INR 10,000,000 has been reduced to 7.5% from present 10%. The surcharge on the Minimum Alternate Tax (MAT) has also been reduced to 7.5%. However the MAT rate has been increased from 15% to 18%.

Dividend Distribution Tax for Domestic Corporations

The effective rate of 16.995% for additional tax on dividends distributed by domestic companies has been reduced to 16.609%, due to reduction in surcharge from 10% to 7.5%.


Disclaimer :

Published: Mar 03, 2010. The information provided in this page is intended merely to highlight issues for general information purposes only. It is not comprehensive nor does it provide legal advice. Any information is subject to change without notice. No liability whatsoever is accepted by Nair & Co.
 
 

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