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Corporate Taxation Guide . India

Private Limited Company Tax Rate in India 2026 Guide

A comprehensive 2026 guide to corporate income tax rates for Private Limited Companies in India, comparing Section 115BAA (22%), Section 115BAB (15%), standard tax slabs, Minimum Alternate Tax (MAT) provisions, surcharges, and health/education cess.

By: TargoLegal Editorial Team Published: 31 July 2026 Law checked: 31 July 2026 Reading time: 12 minutes
CORPORATE TAX REGIMES FOR PRIVATE LIMITED COMPANIES (AY 2026-27) STANDARD REGIME Base Tax Rate: 25% (Turnover ≤ ₹400Cr) 30% (Turnover > ₹400Cr) Surcharge & Cess: 7% / 12% Surcharge + 4% Health/Edu Cess Minimum Alternate Tax: MAT Applies (15%) Deductions allowed SECTION 115BAA Concessional Base Rate: 22% Base Tax Rate (All Domestic Companies) Effective Tax Rate: ~25.17% Effective (Flat 10% Surcharge + 4% Cess) Minimum Alternate Tax: EXEMPT FROM MAT No MAT under Sec 115JB SECTION 115BAB New Manufacturing: 15% Base Tax Rate (Setup post 01-10-2019) Effective Tax Rate: ~17.16% Effective (Flat 10% Surcharge + 4% Cess) Minimum Alternate Tax: EXEMPT FROM MAT No MAT under Sec 115JB TAXPAYER TIP: RUN SIMULATIONS BEFORE ELECTING REGIMES IN ITR-6 Concessional regimes (115BAA/115BAB) offer lower base rates but require forgoing specific deductions.
Corporate tax regimes for Private Limited Companies in India showing standard slabs, Section 115BAA (22%), and Section 115BAB (15%) effective tax rates.
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Contents
STATUTE Income-tax Act, 1961 Governed centrally by CBDT for Assessment Year 2026-27 (FY 2025-26)[cite: 63].
REGIMES 22% vs 15% Options Concessional regimes under Section 115BAA (22%) and Section 115BAB (15%)[cite: 63].
CESS 4% Health & Education Mandatory 4% cess levied on computed Income Tax plus applicable Surcharge[cite: 63].
The practical answer

For Assessment Year 2026-27 (Financial Year 2025-26), the corporate tax rate for a domestic Private Limited Company in India depends on turnover and the elected tax regime[cite: 63]. Under the standard regime, companies with a turnover up to INR 400 Crores pay a 25% base tax, while companies exceeding INR 400 Crores pay a 30% base tax[cite: 63]. Alternatively, existing domestic companies can opt for Section 115BAA to pay a concessional base tax of 22% (effective ~25.17% with flat 10% surcharge and 4% cess)[cite: 63]. New domestic manufacturing companies incorporated on or after October 1, 2019 can opt for Section 115BAB to pay a 15% base tax (effective ~17.16%)[cite: 63]. Both concessional regimes require forgoing specific tax incentives but grant complete exemption from Minimum Alternate Tax (MAT)[cite: 63].

Expert-review status: Verified against the Income-tax Act, 1961 provisions and CBDT return filing rules for AY 2026-27[cite: 63]. A practicing Chartered Accountant (CA) should run a tax simulation before selecting a regime in Form ITR-6[cite: 63].

Keeping up-to-date with corporate tax rates for private limited companies in India is essential for sound financial planning, budgeting, and legal compliance[cite: 63]. India has introduced transformative tax reforms over recent years, reducing baseline tax burdens for domestic businesses and offering optional concessional regimes under Section 115BAA and Section 115BAB[cite: 63]. Understanding how base rates, surcharges, health and education cess, and Minimum Alternate Tax (MAT) interact helps founders and finance teams optimize tax liabilities lawfully[cite: 63].

Statutory Background

Overview of Corporate Tax in India for 2026

Under the Income-tax Act, 1961, every Private Limited Company incorporated in India is classified as a domestic corporate assessee and must file an annual Income Tax Return (ITR), regardless of whether it operated at a profit or a loss[cite: 63].

Corporate tax is levied on the net taxable income earned during the Financial Year (FY)[cite: 63]. To incentivize capital investment, manufacturing, and entrepreneurship, the Central Board of Direct Taxes (CBDT) provides dual tax tracks: the traditional tax system (with full deductions and incentives) and concessional tax schemes (with lower base rates and zero deductions)[cite: 63].

For businesses evaluating entity options, explore our comparison between a Partnership Firm and a Private Limited Company or read our guide on how to register a private limited company in India[cite: 59].

Terminology Foundation

Key Tax Concepts: FY, AY, Domestic vs Foreign, Total Income

Before analyzing tax rates, co-founders and managers must understand these fundamental corporate tax terms[cite: 63]:

1. Domestic Company vs Foreign Company A Domestic Company is an Indian company incorporated under the Companies Act, 2013[cite: 63]. It is taxed on global worldwide income at lower rates (22%, 25%, or 30%)[cite: 63]. A Foreign Company is incorporated outside India and taxed only on Indian-sourced income at a 40% base rate[cite: 63].
2. Financial Year (FY) vs Assessment Year (AY) The Financial Year (FY) is the 12-month earning period from April 1 to March 31 (e.g., FY 2025-26)[cite: 63]. The Assessment Year (AY) is the subsequent period when income earned during the FY is assessed and taxed (e.g., AY 2026-27)[cite: 63].
3. Turnover / Gross Receipts vs Total Taxable Income Turnover represents top-line gross revenue before deducting expenses[cite: 63]. Total Income is net taxable income calculated after deducting business expenses, depreciation, and allowable Chapter VI-A deductions from gross income[cite: 63].
4. Surcharge, Health & Education Cess A Surcharge is an extra tax calculated on the computed income tax amount for high-income companies[cite: 63]. Health & Education Cess is a mandatory 4% levy calculated on the total (Income Tax + Surcharge) amount[cite: 63].
Standard Tax System

Standard Corporate Tax Rates & Turnover Slabs

Under the traditional (old) tax regime, the base corporate tax rate for a domestic Private Limited Company is determined by its total turnover/gross receipts in the prior benchmark year[cite: 63]:

Standard Corporate Income Tax Rates for Domestic Private Limited Companies in India
Company Category / Turnover Benchmark Base Income Tax Rate Applicable Surcharge Health & Education Cess
Domestic Company (Turnover ≤ ₹400 Crores) 25%[cite: 63] Nil (< ₹1Cr) | 7% (₹1Cr–₹10Cr) | 12% (> ₹10Cr)[cite: 63] 4% on (Tax + Surcharge)[cite: 63]
Domestic Company (Turnover > ₹400 Crores) 30%[cite: 63] Nil (< ₹1Cr) | 7% (₹1Cr–₹10Cr) | 12% (> ₹10Cr)[cite: 63] 4% on (Tax + Surcharge)[cite: 63]
Foreign Company operating in India 40%[cite: 63] Nil (< ₹1Cr) | 2% (₹1Cr–₹10Cr) | 5% (> ₹10Cr)[cite: 63] 4% on (Tax + Surcharge)[cite: 63]
Marginal Relief Mechanism

Marginal relief ensures that when a company's total taxable income slightly exceeds a surcharge threshold (such as INR 1 Crore or INR 10 Crores), the additional tax payable (including surcharge) does not exceed the extra income earned above the threshold[cite: 63].

Concessional Tax Track

Concessional Tax Regimes: Section 115BAA and Section 115BAB

The Taxation Laws (Amendment) Act introduced Section 115BAA and Section 115BAB to offer significantly lower corporate tax rates to domestic companies that agree to forgo specific tax deductions[cite: 63]:

1. Section 115BAA (22% Concessional Rate for All Existing Companies)

Section 115BAA allows any domestic Private Limited Company (regardless of turnover or business sector) to opt for a reduced base tax rate of 22%[cite: 63]. Key conditions include[cite: 63]:

  • Flat 10% Surcharge: A flat 10% surcharge applies regardless of total income level[cite: 63].
  • No MAT Liability: Companies opting for Section 115BAA are completely exempt from Minimum Alternate Tax (MAT) under Section 115JB[cite: 63].
  • Deductions Forgone: Must forgo incentives such as Section 10AA (SEZ profit exemptions), Section 32AD, Section 33AB/ABA, Section 35 (scientific research deductions), and Chapter VI-A deductions (except Section 80JJAA and 80M)[cite: 63].

2. Section 115BAB (15% Concessional Rate for New Manufacturing Companies)

Section 115BAB provides a highly competitive base tax rate of 15% for new domestic manufacturing companies incorporated on or after October 1, 2019[cite: 63]. Key conditions include[cite: 63]:

  • Manufacturing Focus: Must be engaged solely in the business of manufacturing or producing articles or goods[cite: 63].
  • Flat 10% Surcharge: A flat 10% surcharge applies regardless of total income level[cite: 63].
  • No MAT Liability: Complete exemption from Minimum Alternate Tax (MAT) under Section 115JB[cite: 63].
Effective Rate Matrix

Effective Tax Rate Comparison (Including Surcharge & Cess)

Because base rates do not include mandatory surcharges and health/education cess, finance teams must evaluate effective corporate tax rates[cite: 63]:

EFFECTIVE CORPORATE TAX RATE COMPARISON MATRIX ~26.0% – 34.94% STANDARD OLD REGIME Base 25% or 30% + Surcharge + 4% Cess | MAT Applies ~25.17% SECTION 115BAA REGIME 22% Base + 10% Surcharge + 4% Cess | NO MAT ~17.16% SECTION 115BAB (MFG) 15% Base + 10% Surcharge + 4% Cess | NO MAT OLD REGIME HIGHLIGHT Ideal for Heavy Capital Investments Allows full accelerated depreciation & loss carryover CONCESSIONAL REGIME Ideal for Service & Asset-Light Firms Eliminates MAT calculations & reduces tax overhead
Figure 1: Effective corporate tax rates including surcharge and health/education cess across Indian corporate tax regimes.
Effective Corporate Income Tax Rates Breakdown for AY 2026-27
Tax Regime Base Rate Surcharge Structure Health & Edu Cess Approximate Effective Rate
Old Scheme (Turnover ≤ ₹400Cr) 25%[cite: 63] 0% (< ₹1Cr) | 7% (₹1Cr-₹10Cr) | 12% (> ₹10Cr)[cite: 63] 4%[cite: 63] 26.00% – 29.12%[cite: 63]
Old Scheme (Turnover > ₹400Cr) 30%[cite: 63] 0% (< ₹1Cr) | 7% (₹1Cr-₹10Cr) | 12% (> ₹10Cr)[cite: 63] 4%[cite: 63] 31.20% – 34.94%[cite: 63]
Section 115BAA (Domestic All) 22%[cite: 63] Flat 10% Surcharge[cite: 63] 4%[cite: 63] 25.17%[cite: 63]
Section 115BAB (New Mfg) 15%[cite: 63] Flat 10% Surcharge[cite: 63] 4%[cite: 63] 17.16%[cite: 63]
Book Profit Tax

Minimum Alternate Tax (MAT) & Section 115JB Provisions

Minimum Alternate Tax (MAT) under Section 115JB ensures that profitable companies that utilize extensive tax deductions do not pay zero tax[cite: 63]:

1. Standard MAT Rate (15% of Book Profits) Under the standard regime, if the tax liability calculated on normal income is lower than 15% of book profits, the company must pay 15% MAT (plus applicable surcharge and 4% cess)[cite: 63].
2. Complete MAT Exemption under Concessional Regimes Domestic companies that opt for Section 115BAA or Section 115BAB are explicitly exempt from Section 115JB MAT provisions[cite: 63].
3. MAT Credit Utilization Rules MAT paid in excess of normal tax under the old regime can be carried forward for up to 15 Assessment Years[cite: 63]. However, if a company switches to Section 115BAA, accumulated MAT credit cannot be utilized[cite: 63].
4. Book Profit Adjustments Book profits are computed by adjusting net profits shown in the P&L account according to statutory additions and deductions mandated under Section 115JB[cite: 63].
Filing Execution

Return Filing Deadlines, Form ITR-6 & Regimes Election

Filing corporate tax returns on time is essential to avoid statutory penalties and maintain compliance under the Income-tax Act[cite: 63]:

Elect Tax Regime in Form ITR-6

Private Limited Companies declare their elected tax regime (Old, Section 115BAA, or Section 115BAB) electronically while filing Form ITR-6 on the Income Tax portal[cite: 63]. For Section 115BAA/115BAB, Form 10-IC / Form 10-ID must be submitted prior to ITR filing[cite: 63].

Complete Statutory Tax Audit (Section 44AB)

If company turnover exceeds INR 1 Crore (or INR 10 Crores for digital transaction businesses with 95%+ digital receipts), a Chartered Accountant audit under Section 44AB must be completed and Form 3CA/3CD submitted by September 30[cite: 63].

Observe Income Tax Filing Deadlines

For corporate assessees subject to tax audit, the mandatory deadline for filing Form ITR-6 is October 31 of the Assessment Year[cite: 63]. For companies subject to transfer pricing reporting under Section 92E, the deadline is November 30[cite: 63].

Pay Advance Tax Installments

Companies must pay advance tax in four quarterly installments (15% by June 15, 45% by September 15, 75% by December 15, and 100% by March 15) to avoid interest penalties under Sections 234B and 234C[cite: 63].

Risk Avoidance

Common Tax Planning Pitfalls to Avoid

1. Switching to Section 115BAA Without Evaluating MAT Credits Opting for Section 115BAA causes unutilized MAT credits accrued under the old regime to lapse permanently. Always calculate whether utilizing existing MAT credit yields lower total cash outflow before switching[cite: 63].
2. Attempting to Revert to the Old Regime Once a domestic company elects Section 115BAA or Section 115BAB, the election is binding for all future assessment years and cannot be revoked[cite: 63].
3. Claiming Prohibited Deductions Under Concessional Regimes Claiming Section 10AA or scientific research incentives while electing Section 115BAA triggers reassessment proceedings and severe tax penalties[cite: 63].
4. Missing Form 10-IC / 10-ID Filing Deadlines Failing to file Form 10-IC prior to submitting ITR-6 results in the Income Tax Department evaluating the company under the higher standard 30% tax rate[cite: 63]. To review corporate structure alternatives, view our guide on exemptions to private companies under the Companies Act[cite: 63].
TargoLegal Tax & Advisory Services

Optimize Your Corporate Tax Strategy for AY 2026-27

Consult with TargoLegal's Chartered Accountants and corporate tax specialists for end-to-end tax regime simulation, Section 115BAA evaluation, Form ITR-6 filing, and MAT optimization[cite: 63].

Request Tax Strategy Consultation
Corporate Questions

Frequently Asked Questions

What is the standard corporate tax rate for a Private Limited Company in India in 2026?

For domestic companies with an annual turnover up to INR 400 Crores, the standard base tax rate is 25%[cite: 63]. For companies with turnover exceeding INR 400 Crores, the standard base tax rate is 30%[cite: 63]. Surcharges (7% or 12%) and a mandatory 4% Health and Education Cess apply on top of the base tax[cite: 63].

What is the Section 115BAA concessional tax rate for domestic companies?

Section 115BAA allows domestic private limited companies to opt for a concessional base tax rate of 22% regardless of turnover, provided they forgo specific deductions and incentives[cite: 63]. With a flat 10% surcharge and 4% cess, the effective tax rate is approximately 25.17%[cite: 63].

What is the Section 115BAB tax rate for new manufacturing companies?

Section 115BAB offers a highly concessional base tax rate of 15% for new domestic manufacturing companies incorporated on or after October 1, 2019[cite: 63]. With a flat 10% surcharge and 4% cess, the effective tax rate is approximately 17.16%[cite: 63].

Does Minimum Alternate Tax (MAT) apply under Section 115BAA and 115BAB?

No[cite: 63]. Domestic companies that opt for the concessional tax regimes under Section 115BAA or Section 115BAB are explicitly exempt from Minimum Alternate Tax (MAT) under Section 115JB[cite: 63].

What is the rate of Health and Education Cess on corporate tax?

A mandatory Health and Education Cess of 4% is levied on the aggregate amount of computed Income Tax plus applicable Surcharge across all corporate tax regimes[cite: 63].

Current Official References

Official Research Sources

  1. Income Tax Department, Government of India - Statutory provisions under Section 115BAA, Section 115BAB, Section 115JB (MAT), and Form ITR-6 guidelines[cite: 63].
  2. Central Board of Direct Taxes (CBDT) - Corporate tax rate notifications, surcharge threshold guidelines, and Form 10-IC / 10-ID filing rules[cite: 63].
  3. Ministry of Corporate Affairs (MCA) - Financial statement filing and corporate disclosures alignment with ITR returns[cite: 63].
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