Private Limited Company Tax Rate (All You Need to Know)

Private limited company tax rates depend on the company’s size and turnover, yet all private limited companies are required to file for income tax returns.

In India, the most popular type of business entity is a private limited company. ITR 6 or ITR 7 income tax returns must be filed annually by all private limited firms registered in India, regardless of turnover or profitability. As a result, income tax returns must be filed even by private limited businesses that have been formed but are not engaged in any commercial activity. This article examines the income tax rate that will apply to private limited enterprises for the assessment year 2022–2023 (AY 2022–2023).

Private Limited Company Income Tax

A private limited business has two categories. The first is a domestic company, in which there are no forging investments, and the second is a foreign company, in which There are forging investments.

As was already indicated, submitting income tax returns is required. Thus regardless of turnover, a profit and loss ITR must be filed, and ROC compliances are necessary to complete.

Returns Relevant to Domestic Companies for the AY 2022–23

Form ITR-6 

Companies apart from those seeking exemption under Section 11 of the Income Tax Act may use this form:

• Indian Company
• Body corporate formed by or under the laws of a nation other than India
• Any organization, group, or body that the Board declares to be a company, etc., whether or not it is incorporated and whether it is Indian or not.

ITR-7 Form

People and businesses that must provide returns under Section 139 (4A), Section 139 (4B), Section 139 (4C), or Section 139 are included (4D)

• Section 139(4A) – Income from properties owned under trust used entirely or partially for charity or religious purposes is subject to taxation under this section.
• Section 139(4B) – Every political party’s CEO is required under the category.
• Section 139(4C) – Various organizations, such as News Agencies, Research Associations, and others indicated in Section 10
• Section 139(4D) – Colleges, universities, or other establishments referred to in Section 35 are covered under this section.

For the FY 2021–2022, returns must be filed by September 30, 2022. Each firm in India is required to file its income tax return by the end of September.

Corporate Taxation in India

A corporation is a company that differs from its investors in terms of its legal status. Both local and foreign businesses must pay corporation tax under the Income-tax Act. In contrast to local businesses, which are taxed on their whole income, international corporations are only taxed on the income collected or received in India.

For computing taxes under the Income Tax Act, the following types of businesses can be classified:

Domestic Company: A domestic company is one that the Companies Act of India recognizes and also covers organizations registered abroad but have their whole management and control structures based in India. Both private and public businesses are considered domestic corporations.

Foreign company:  A company that is not registered under the Indian Companies Act and has management and control that are situated outside of India.

Corporate Income Tax Rate AY 2022–23

There are two categories of the Taxation of Private Limited Companies in the Finance Budget: Turnover above 400 Crore & Turnover below 400 Crore. Read The slab-wise corporate income tax rate in India for FY 2021–2022 or AY 2022–2023 below.

The company’s tax rate if its revenue exceeds Rs. 400 crores.

1. 30% up to 1 crore
2. Over 1 crore, but not more than 10 crores, plus 3,00,000+30%
3. Over 10 crore 3,00,00,000 + 30%

If a Company’s Turnover Exceeds Rs. 400 Crore, the Tax Rate is.

1. 25% up to one crore
2. Over 1 crore but up to 10 crores, 25,00,000 plus 25%
3. Over 10 crore, 2,50,00,000 + 25%

Tax surcharge on income

An additional fee on top of income tax is known as a surcharge. It is an extra tax on taxpayers with higher income inflows during a fiscal year.

Only private limited enterprises with a total annual income of more than Rs. 1 crore are subject to an income tax surcharge.

1. A 7% surcharge to the income tax is due if a private limited business has a total income between Rs. 1 crore and Rs. 10 crore.
2. Private limited enterprises with annual revenues above Rs. 10 crores are subject to a 12% surcharge on their income tax obligations.

The revised budget for 2022

FM suggests capping the levy for Associations of Persons (AOPs) with only businesses as members at 15% in Budget 2022. It applies to AOPs with a fiscal year total income of more than Rs 2 Crores.

Additionally, there is a 15% cap on the long-term capital gains (LTCG) surcharge on listed equity shares, units, etc.

Rate of Income Tax for Foreign Companies

1. Foreign companies pay a fixed tax rate of 40% and a 4% cess on their total income tax plus a surcharge.
2. If the net income is more significant than Rs. 1 crore but less than Rs. 10 crore, there will be a surcharge of 2%, and if it is more effective than Rs. 10 crores, it will be 5%.

Minimum Alternate Tax for a Company 

Businesses can lower their tax obligation through several provisions of the Income-Tax Act, including exemptions, deductions, and depreciation. Some companies have even declared no taxable revenue, despite making sizable profits and paying dividends.

The government established the Minimum Alternate Tax (MAT) to bring these “zero-tax paying enterprises” inside the purview of income tax and require them to pay the government a minimal amount in tax.

In the fiscal year 2022–2023, a minimum alternative tax (MAT) of 15% will be applied to book profits.

FAQ: Private Limited Company Tax Rate

1. How much do private companies pay in taxes?

A 25% tax is imposed on profits made by Private Limited companies under 400 crores in the last year. 30% tax is applied if their annual revenue exceeds 400 crores. Additionally, Budget 2019 included a spate of fresh business tax reductions. Now, businesses can choose between the new rates of 22% (for currently operating businesses) and 15%. (for new companies).

2. Do private companies pay corporate tax?

Yes, paying tax as a registered private limited company is necessary. There are two categories of Taxation of Private Limited Companies in the Finance Budget: Turnover exceeding 400 crores and turnover under 400 crores. Midsize businesses pay a private limited company income tax rate of 25%.

3. Does a private company deduct tax from salary?

All legal entities, including private corporations, must deduct taxes when receiving payments linked to their activity as long as the costs exceed the limits set in the tax statute. If the salary due in a given year, after deductions, is more significant than Rs. 2.5 lakh, then TDs must be taken out.

4. What is TDS for Pvt Ltd company?

TDS for private companies vary as per the specification and size of the private limited company. Refer government website for detailed information.

5. Is GST required for Pvt Ltd company?

The procedure for GST registration for a private limited company is as follows: To benefit from input tax credits, businesses, individuals, and other entities that purchase, sell, or provide services must register as Goods and Services Tax (GST) participants.

Conclusion

Private limited companies and LLPs are the most popular business structures in India. There are two categories of Private Limited: one is a domestic firm, meaning there are no foreign investments, and the other is a foreign company, meaning international investments are present. Every firm in India is required to submit its income tax returns by the end of September. 

It is required to file an income tax return, which indicates that ROC compliances must be completed regardless of turnover, profit, or loss. 

Taxation of Private Limited Companies in the Finance Budget Corporate tax is broken down into two categories: Turnover exceeding 400 crores and turnover under 400 crores. Midsize businesses pay a private limited company income tax rate of 25%. For the fiscal years 2021–22 and 2022–23, India’s corporate income tax rate is detailed below each tax slab. Private Limited firms must pay a surcharge in addition to income tax.

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