19. Corporate Income Tax—India Case Study

A corporation is a separate and independent legal person from its shareholders. Corporate tax is paid on the net profit made from business by corporations. Corporate income is taxed at a specific rate prescribed under the Indian Income-tax Act (the law). Indian and foreign companies are both liable to pay corporate tax. An Indian company is registered under the Indian Companies Act and includes corporations established under central or provincial acts. A domestic company includes private and public companies. A foreign company is one which is incorporated in any foreign country. Companies are taxed based on their residential status. A company is resident for tax purposes if it is incorporated in India or if its place of effective management (POEM) is in India during the relevant fiscal year. POEM is a place where key management and commercial decisions for the conduct of business are made in substance. A resident company is taxed on its global income. A non-resident company is taxed on Indian income accrued or received in India. The scope of Indian income is defined under the law. These matters are addressed in this chapter. Deductions, amortisation, maintenance of accounts and audits, and presumptive taxation are also examined.