Corporate Tax in India 2026: Rates, Surcharge & Rules Explained

Corporate tax planning in India isn't as simple as applying a single flat rate to company profits — the actual rate a business pays depends heavily on decisions made at incorporation, the specific tax regime chosen, company turnover, and whether it's engaged in manufacturing. Understanding this structure, including how surcharge is calculated on top of the base rate, is essential for accurate tax planning. This blog breaks down corporate tax in India for 2026 clearly.

Corporate Tax Structure in India: The Big Picture

Corporate taxation in India is governed by the Income Tax Act, 1961, with rates varying based on company type (domestic vs foreign), turnover, total income, and which tax regime the company elects. Rather than a single number, corporate tax in India is best understood as a range, with the specific rate depending on choices made by the business.

Standard Domestic Company Tax Rates

• General rate: 30% for domestic companies not opting for any concessional regime.
• Reduced rate for smaller companies: 25% for domestic companies with turnover up to ₹400 crore in the relevant previous financial year.

Section 115BAA: The Concessional Regime

Section 115BAA, introduced in September 2019, allows any domestic company — regardless of sector or turnover — to elect a flat 22% base tax rate, provided the company forgoes certain deductions and exemptions (including most Chapter VI-A deductions and Section 10AA benefits). Companies choosing this option:

• Pay a flat 10% surcharge, irrespective of total income level (notably more favourable than the standard, income-based surcharge structure for higher-income companies).
• Pay a 4% Health and Education Cess on top of the tax and surcharge combined.
• Are exempt from Minimum Alternate Tax (MAT).
• End up with an effective tax rate of approximately 25.17%.

This option must be exercised before the income tax return filing due date (generally September 30 of the relevant assessment year), and once chosen, the decision is permanent and cannot be reversed.

Section 115BAB: The Manufacturing-Specific Regime

Section 115BAB offers an even lower rate — a 15% base tax rate — specifically for new domestic manufacturing companies. However, eligibility requires the company to have been incorporated on or after October 1, 2019, and to have commenced production before a specified deadline (March 31, 2024, as per current provisions, though this has been subject to periodic government review). With the same 10% surcharge and 4% cess structure, the effective rate under this section works out to approximately 17.16%. It's worth noting that businesses incorporating fresh in 2026 are generally no longer eligible for this specific rate, given the production-commencement deadline has passed.

Understanding Corporate Surcharge