Insights · India Tax
India Corporate Tax Rates for Tax Year 2026-27: 22%, 25%, 30% and the Closed 15% Regime
The corporate tax rates that apply under the Income-tax Act, 2025, the new section numbers, why new manufacturers can no longer get 15%, and what changed for minimum alternate tax.
For tax year 2026-27 most Indian companies pay corporate tax at 22%, which is 25.17% with surcharge and cess, under the concessional regime now found in section 200 of the Income-tax Act, 2025. Companies that stay in the old regime pay 25% or 30%. The 15% regime for new manufacturers still exists for those already in it, but it closed to new entrants on 31 March 2024. Foreign companies pay 35%.
Rates for tax year 2026-27
- Section 200 (formerly 115BAA): 22%, effective 25.17%
- Section 201 (formerly 115BAB): 15%, effective 17.16%, only for companies that began manufacturing by 31 March 2024
- Old regime: 25% where turnover in tax year 2024-25 was Rs 400 crore or less, otherwise 30%
- Foreign companies: 35%
- Minimum alternate tax: reduced to 14% of book profit by the Finance Act, 2026; it does not apply under sections 200 and 201
The rate table
| Company | Basic rate | Surcharge | Effective rate including 4% cess |
|---|---|---|---|
| Domestic, section 200 regime | 22% | 10% flat | 25.17% |
| Domestic manufacturer, section 201 regime | 15% | 10% flat | 17.16% |
| Domestic, old regime, turnover up to Rs 400 crore | 25% | Nil, 7% or 12% | 26% to 29.12% |
| Domestic, old regime, other | 30% | Nil, 7% or 12% | 31.2% to 34.94% |
| Foreign company | 35% | Nil, 2% or 5% | 36.4% to 38.22% |
In the old regime and for foreign companies, surcharge applies where total income exceeds Rs 1 crore, and at the higher rate above Rs 10 crore.
Surcharge bands, the caps on capital gains and how marginal relief works are set out in more detail in the guide to surcharge on income tax on FilingBase, our compliance platform.
Section 200: the 22% option
Any domestic company can opt in. In exchange it gives up most incentives: special economic zone deductions, additional depreciation, investment-linked and area-based deductions, and most of the profit-linked deductions. Deductions for new employment and for dividends passed on to shareholders remain available. Brought-forward losses and depreciation that arose from the forgone incentives cannot be set off. The option is exercised in the prescribed form by the due date of the return, and once made it cannot be withdrawn in later years.
For a company with no significant incentives, which is most service and trading companies, this is simply the rate. The decision takes work only for companies carrying minimum alternate tax credit or old-regime losses.
Section 201: the closed 15% regime
The 15% rate was available to companies incorporated on or after 1 October 2019 that began manufacturing or production on or before 31 March 2024, used new plant, and were not formed by splitting an existing business. The commencement deadline was not extended. A company incorporated today cannot enter this regime, whatever it manufactures. Companies already in it continue at 15%, and should note that income not derived from manufacturing is taxed at 22%, and that the tax officer can recompute profits from dealings with related parties that appear inflated.
New manufacturing investment is now supported mainly through the production-linked incentive schemes and state industrial policies, not through the corporate tax rate.
Minimum alternate tax
Companies in the old regime pay at least a minimum tax on book profit. The Finance Act, 2026 reduced the rate from 15% to 14% and restricted the creation and use of credit for it. Companies under sections 200 and 201 are outside it entirely. Units in an International Financial Services Centre pay 9%. A company holding a large credit balance should model whether and when to move to section 200 before the next return, because the 2026 changes alter that calculation.
Tax on distributing profits
- Dividends are taxed in the shareholder’s hands. The company deducts 10% for resident shareholders and 20% plus surcharge and cess for non-residents, or the treaty rate. See India-UAE DTAA withholding rates for an example of treaty rates.
- Buybacks. From 1 October 2024 the company-level buyback tax was removed and the proceeds were taxed as dividend in the shareholder’s hands. The Finance Act, 2026 moved buyback proceeds to capital gains treatment from 1 April 2026, with a higher effective rate for promoters. Check the current position before any buyback.
What this means for foreign investors
An Indian subsidiary at 25.17% plus dividend withholding at a treaty rate of 10% or 15% gives a combined rate of about 33% to 36% on distributed profit. A branch or project office of a foreign company pays 35% plus surcharge and cess on Indian profits with no further tax on remittance, so the two routes are closer than the headline rates suggest. The choice usually turns on liability, FEMA permissions and the home country’s treatment. We compare the routes in our India market entry work.
Related reading: TDS on payments to non-residents under section 393, reverse flip to India and cross-border structuring across India, the UAE and the USA.
More reading: Income-tax Act 2025 section mapping.