Knowing limited company tax is quite crucial whether you run a business or intend to start one. Many businesses are registered in India either as public limited companies or private limited companies. Like people, these businesses must pay taxes on their income. Still, the rates and regulations differ. We shall clearly and simply explain limited company tax in this article.
Definition of a Limited Company
A limited company exists legally apart from its owners. The business can thus pay taxes under its own name, take loans, and own real estate. Most companies in India want this kind of structure for advantages including limited liability and enhanced reputation.
There are essentially two varieties:
- Public Limited Company (Pvt Lt)
- Ltd Public Limited Company
Under the corporate tax code, both forms are taxed.
The Mechanics of Limited Company Tax
In India, a limited company reports income tax on its earnings. The tax is computed from the income less salaries, expenses, and other company costs.
The current limited company tax rate is influenced by the following:
- If domestic companies do not apply special exemptions, the base corporate tax for them is roughly 22% (excluding surcharge and cess).
- If they were registered after October 2019 and satisfy specific requirements, new manufacturing firms could enjoy a lower rate of 15%.
- Should a business choose standard tax rates with exemptions, the rate could be about 25%.
- Companies who use too many exemptions to lower their tax load also pay a minimum alternate tax (MAT) of 15%.
What Makes Up Limited Company Tax?
A company’s tax payment could include:
- Business tax on earnings
- 2020 saw the removal of Dividend Distribution Tax (DDT), but now shareholders pay tax on dividends.
- Surcharge: Health and Education Cess on tax load
- Advance taxes should be paid if annual total tax owing exceeds ₹10,000.
Benefits and Deductibles
Businesses claiming deductions for limited company tax can:
- Payments of salaries to staff members
- Rent and utilities bills
- Decline in asset value
- Expert charges
- Business travel costs
Declaring these helps to save taxes by lowering the taxable income.
File Limited Company Tax Returns: How to
Returns are filed online using the Income Tax Department portal. The technique is as follows:
- Create profit and loss, balance sheet financial statements.
- Get an audit done as needed.
- Calculate advance tax and pay if necessary.
- File ITR-6 form before the due date.
- Prepare paperwork for inspection.
Last Words
Managing a profitable business in India depends on knowing limited company tax. It guides your adherence to the regulations, helps you avoid fines, and maximizes the available deductions. Good planning and accurate record-keeping will help you to easily handle your taxes and concentrate more on the expansion of your business.
