Company Tax Rate in India for 2026: Normal Rates, the 22% Regime, MAT and Effective Tax Rates

If you run a private limited company, or are deciding whether to incorporate one, the tax rate is not one number. Indian companies choose between a normal regime and concessional regimes, pay a surcharge that depends on income, and may owe a minimum alternate tax on book profit. This guide sets out the company tax rates for 2026 under the Income-tax Act, 2025 and the Finance Act, 2026, the effective rate in each case, the 14% MAT introduced this year, and how an MSME-sized company should choose between 22% and the normal rate, with worked examples in rupees.

Quick answer

For tax year 2026-27, a domestic company pays 25% if its turnover in tax year 2024-25 (FY 2024-25) was within ₹400 crore, otherwise 30%, or it can opt for a flat 22% under section 200 (old 115BAA) by giving up most deductions. Surcharge and 4% cess apply on top.

• Effective rate on the 22% regime: 25.17% at all income levels

• Normal-rate surcharge: 7% above ₹1 crore, 12% above ₹10 crore

• MAT cut to 14% of book profit and made a final tax for normal-regime companies

• Foreign companies: 35% plus surcharge and cess

• No exemption limit or slabs: tax applies from the first rupee

Which law and which year this covers

India replaced the Income-tax Act, 1961 with the Income-tax Act, 2025 from 1 April 2026. The new Act applies to income earned from that date, which it calls tax year 2026-27 (the old law would have called it previous year 2026-27, assessed in assessment year 2027-28). A company filing its return in 2026 for the year ended 31 March 2026 is still dealing with the old Act and assessment year 2026-27. The rates for both years are the same, but the section numbers are not.

Company tax rates come from two places. The normal rates are fixed every year in the First Schedule to the Finance Act. The concessional rates are written into the Act itself, in sections 199, 200 and 201 of the new law. The Finance Act, 2026, which received Presidential assent on 30 March 2026, kept every company rate unchanged. Its main corporate change was to minimum alternate tax.

Company tax rates for 2026 at a glance

Company tax rates for tax year 2026-27

Type of company	Base rate	Surcharge	Effective rate with 4% cess
Domestic, turnover in 2024-25 up to ₹400 crore	25%	Nil to ₹1 cr · 7% to ₹10 cr · 12% above	26% · 27.82% · 29.12%
Domestic, other	30%	Nil to ₹1 cr · 7% to ₹10 cr · 12% above	31.2% · 33.38% · 34.94%
Domestic, opted for section 200	22%	10% flat	25.17%
New manufacturer, section 201	15%	10% flat	17.16%
Manufacturer set up from 1 Mar 2016, section 199	25%	Nil to ₹1 cr · 7% to ₹10 cr · 12% above	26% · 27.82% · 29.12%
Foreign company	35%	Nil to ₹1 cr · 2% to ₹10 cr · 5% above	36.4% · 37.13% · 38.22%

Domestic, turnover in 2024-25 up to ₹400 crore

Base rate

25%

Surcharge

Nil to ₹1 cr · 7% to ₹10 cr · 12% above

Effective rate with 4% cess

26% · 27.82% · 29.12%

Domestic, other

Base rate

30%

Surcharge

Nil to ₹1 cr · 7% to ₹10 cr · 12% above

Effective rate with 4% cess

31.2% · 33.38% · 34.94%

Domestic, opted for section 200

Base rate

22%

Surcharge

10% flat

Effective rate with 4% cess

25.17%

New manufacturer, section 201

Base rate

15%

Surcharge

10% flat

Effective rate with 4% cess

17.16%

Manufacturer set up from 1 Mar 2016, section 199

Base rate

25%

Surcharge

Nil to ₹1 cr · 7% to ₹10 cr · 12% above

Effective rate with 4% cess

26% · 27.82% · 29.12%

Foreign company

Base rate

35%

Surcharge

Nil to ₹1 cr · 2% to ₹10 cr · 5% above

Effective rate with 4% cess

36.4% · 37.13% · 38.22%

The 25% rate depends on size, not on profit. For tax year 2026-27, Paragraph E of Part I-B of the First Schedule to the Finance Act, 2026 gives 25% to a domestic company whose total turnover or gross receipts in tax year 2024-25 did not exceed ₹400 crore. The reference year moves forward each year, so check the Finance Act every February. Almost every MSME company falls within this limit. Note that this is unrelated to the "small company" definition in the Companies Act, 2013, which uses much lower paid-up capital and turnover limits for company-law relaxations.

Companies pay tax from the first rupee of taxable income. There is no basic exemption, no slab structure and no rebate. A company with ₹3 lakh of taxable profit pays ₹78,000 at the 26% effective rate, even though a proprietor earning the same amount would pay nothing. Marginal relief applies wherever surcharge kicks in, so a company with taxable income of ₹1.01 crore does not pay more extra tax than the extra ₹1 lakh of income.

How surcharge and marginal relief work

Surcharge is a tax on the tax, charged once total income crosses a threshold, and it applies to the whole tax, not just the part above the threshold. Without a safeguard, a company earning one rupee over ₹1 crore would pay several lakh rupees more than one earning exactly ₹1 crore. Marginal relief, provided in the Finance Act for every surcharge band, prevents this: the tax plus surcharge on income above a threshold cannot exceed the tax on the threshold amount plus the income above it.

Take a domestic company on the 25% rate with taxable income of ₹1,01,00,000. Tax at 25% is ₹25,25,000, and a 7% surcharge would add ₹1,76,750. But the tax on exactly ₹1 crore is ₹25,00,000, and the company earned only ₹1,00,000 more. So tax plus surcharge is capped at ₹26,00,000, and the surcharge actually payable is ₹75,000. Cess of 4% on ₹26,00,000 brings the total to ₹27,04,000, about ₹1.06 lakh less than without the relief.

The relief fades out quickly. For a 25% company, it stops mattering once taxable income reaches roughly ₹1.024 crore, after which the full 7% surcharge is cheaper than the cap. The same mechanism applies at ₹10 crore, where the surcharge rises from 7% to 12%. Companies on section 200 or 201 pay a flat 10% surcharge from the first rupee, so marginal relief is not relevant to them, and neither is planning around the ₹1 crore line.

The 22% regime under section 200 (old 115BAA)

Any domestic company can opt to pay 22% under section 200 of the new Act. There is no condition on turnover, date of incorporation or type of business. The surcharge is a flat 10% flat regardless of income, and with cess the effective rate is 25.17% at every income level. For a large company that would otherwise pay 34.94%, the saving is nearly ten percentage points. For a company within the ₹400 crore limit, the gap is far smaller: 25.17% against 26% up to ₹1 crore of income, and against 27.82% between ₹1 crore and ₹10 crore.

The price is giving up deductions. Section 200 requires total income to be computed without any of the deductions listed in section 205(1): additional depreciation on new plant and machinery (section 33(8)), the scientific research deductions in section 45, the capital-expenditure deduction for specified businesses in section 46, the deductions for agricultural extension and skill development projects, the tea, coffee and rubber development and site restoration deductions, and the SEZ unit deduction in section 144. All Chapter VIII deductions are also lost except two: the deduction for additional employee cost in section 146 (old 80JJAA) and the deduction for inter-corporate dividends in section 148 (old 80M). Losses and unabsorbed depreciation that came from any of these deductions cannot be set off either.

The option is exercised in the prescribed form on or before the due date for filing the return for the first year it is to apply, and section 200(6) makes it permanent. Once in, a company cannot return to the normal regime. Companies that opted for 115BAA under the old Act continue under section 200 automatically. Companies on section 200 do not pay minimum alternate tax at all.

The manufacturing regimes: sections 199 and 201

Two older regimes target manufacturers. Section 199 (old 115BA) gives 25% to a domestic company set up and registered on or after 1 March 2016 that does nothing but manufacture or produce an article or thing, along with research on and distribution of what it makes. Its conditions on deductions are similar to section 200, and the option, once taken, can be given up only by moving to section 200. With a 25% rate now available to every company within the ₹400 crore turnover limit, section 199 has little practical value for new MSMEs.

Section 201 (old 115BAB) offers 15% to a domestic manufacturing company set up and registered on or after 1 October 2019 that began manufacturing or production on or before 31 March 2024. Since the commencement deadline has passed and was not extended, no new company can enter this regime. Existing section 201 companies continue at 15% (17.16% effective), with 22% on income not derived from manufacturing and 30% on certain deemed income, as long as they keep meeting the conditions, including not using previously used machinery beyond 20% of the total and not being formed by splitting up an existing business. A company that breaks a condition loses the option and can move to section 200.

Minimum alternate tax: now 14% and final

Minimum alternate tax makes sure companies that show accounting profits pay some tax even if deductions wipe out their taxable income. Under section 206(1), if a company's tax on total income is less than MAT on its book profit, the book profit is treated as its total income and it pays MAT. Book profit starts from the profit in the statement of profit and loss, adjusted for items such as income tax, reserves, unascertained provisions and dividends.

The Finance Act, 2026 made three changes from tax year 2026-27. First, it cut the MAT rate from 15% to 14% of book profit. Second, it made MAT a final tax for companies on the normal regime: MAT paid from tax year 2026-27 no longer creates a credit to be used in later years. Third, it changed how credit already built up under section 115JAA of the old Act can be used. A domestic company that moves to section 200 or 201 for a tax year beginning on or after 1 April 2026 can set off that old credit, but only up to 25% of the tax payable for the year, carrying the rest forward within the original 15-year limit. If a private or unlisted company converts into an LLP, the credit is lost.

MAT does not apply to companies that have opted for section 200 or 201. Surcharge on MAT for normal-regime domestic companies follows the same 7% and 12% bands. With cess, the effective MAT rate is 14.56% up to ₹1 crore of book profit, about 15.58% from ₹1 crore to ₹10 crore and about 16.31% above.

MAT from tax year 2026-27

14% of book profit

MAT rate on book profit

was 15%

14.56%

Effective MAT up to ₹1 crore

with 4% cess

Nil

New MAT credit

MAT is now a final tax

25% of the tax payable for the year

Cap on using old credit

on moving to s.200/201

For companies sitting on large MAT credit, the change forces a decision. Staying on the normal regime means the credit can be used only when normal tax exceeds MAT. Moving to section 200 gives the lower 22% rate and allows the credit to be used, but slowly, at a quarter of each year's tax.

Normal rate or 22%: worked examples for an MSME company

The choice comes down to how much of your deductions you would give up, now and in future, against a small rate saving. The examples below assume a domestic company with turnover under ₹400 crore.

Three companies, two regimes (tax year 2026-27)

1. 1

   Company A — ₹50 lakh profit, no special deductions

   Normal: ₹50,00,000 × 26% = ₹13,00,000. Section 200: ₹50,00,000 × 25.168% = ₹12,58,400. Saving with 22%: ₹41,600 a year.

2. 2

   Company B — ₹2 crore profit, no special deductions

   Normal: ₹2,00,00,000 × 27.82% = ₹55,64,000. Section 200: ₹2,00,00,000 × 25.168% = ₹50,33,600. Saving with 22%: ₹5,30,400.

3. 3

   Company C — same as B, but ₹40 lakh additional depreciation on new machinery

   Normal: taxable ₹1,60,00,000 × 27.82% = ₹44,51,200. Section 200: additional depreciation not allowed, taxable ₹2,00,00,000 × 25.168% = ₹50,33,600. The normal regime saves ₹5,82,400 this year.

   Tip: Check MAT under the normal regime too: at 15.58% effective, MAT would replace normal tax only if Company C's book profit exceeded about ₹2.86 crore.

Three points come out of these numbers. For a small company with no special deductions, the 22% regime saves a little, but the saving is under one percentage point until profit crosses ₹1 crore. Above ₹1 crore of profit, the surcharge difference makes section 200 more attractive. And a manufacturer that is investing in new machinery, or claiming a profit-linked deduction, may be better off on the normal regime in the investment years, because additional depreciation alone can outweigh the rate gap. Since section 200 is a one-way door, project at least three to five years before opting. Our depreciation rate chart explains additional depreciation and the 40% cap on the concessional regimes.

Dividends, buybacks and getting money out

Corporate tax is only half the story for owner-managed companies. When profit is paid out as a dividend, the shareholder pays tax on it at his own rate. The company has paid no dividend distribution tax since 1 April 2020. A domestic company receiving dividends from another company can deduct them under section 148 to the extent it distributes dividends itself, which avoids tax cascading in group structures.

From 1 April 2026, the Finance Act, 2026 changed how share buybacks are taxed. Money received on a buyback is now taxed as capital gains instead of as a dividend. Promoters pay an additional income tax on those gains, which the Finance Bill memorandum describes as bringing their effective liability to 22% for a promoter that is a domestic company and 30% for other promoters.

Owners who work in the business can also take money out as salary, which is deductible for the company and taxed as salary in their hands, with the standard deduction. The right mix of salary and dividend depends on each owner's other income. If profit is mainly going to be distributed, compare the company route with an LLP, where the partners' share of profit is exempt; our guide on LLP income tax works through a side-by-side example.

Returns, advance tax and due dates

Every company files ITR-6, whatever its income, and every company's accounts are audited under the Companies Act. Because of that audit, a company's return is due by 31 October following the tax year, or 30 November if it has international or specified domestic transactions that need a transfer pricing report. For the year ended 31 March 2026 (assessment year 2026-27), the CBDT has extended the audit-case return date to 21 November 2026.

Companies must pay advance tax in four instalments, by 15 June, 15 September, 15 December and 15 March, if the tax for the year is ₹10,000 or more. The calculation must use the regime the company has opted for, and MAT, if applicable. Shortfalls attract interest. A company that opts into section 200 for the first time needs to file the option form by the return due date; if it misses that date, it stays on the normal regime for the year.

A company's income-tax calendar for tax year 2026-27

15 Jun 2026

Advance tax — at least 15% of the year's tax

15 Sep 2026

Advance tax — cumulative 45%

15 Dec 2026

Advance tax — cumulative 75%

15 Mar 2027

Advance tax — 100%

30 September 2027

Tax audit report, if required

31 October 2027

ITR-6 and section 200 option form (first year)

Common mistakes companies make with tax rates

Using the wrong reference year for the ₹400 crore test is a frequent error, as is forgetting that surcharge for normal-rate companies starts at ₹1 crore of income, not turnover. Companies that opt for section 200 sometimes keep claiming additional depreciation or carry forward losses that came from a lost deduction, which the department disallows. Others opt into section 200 without noticing that it is irreversible and later regret it when they start a capital-heavy expansion. Finally, companies with old MAT credit often assume it is lost under the new Act; it is not, but its use is now restricted, so it needs to be tracked year by year in the tax computation.

Official links

• Finance Act, 2026 (Gazette)Company rates, surcharge and the MAT amendment
• New Income-tax Act FAQsHow the 2025 Act replaces the 1961 Act
• Finance Bill 2026 memorandumExplanation of rate, MAT and buyback changes
• Income Tax e-filing portalFile ITR-6, option forms and pay advance tax

What to do next

Check which regime your company is on today and whether you exercised an option under the old Act that carries over. Then project profit, planned capital spending and any deductions you rely on for the next three to five years, and run both regimes, including MAT under the normal regime and any old MAT credit. If you are still choosing a structure, compare this page with our guides on LLP income tax and partnership firm income tax, and see our private limited company annual compliance checklist for the filings that come with incorporation.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the company tax rate in India for 2026?

For tax year 2026-27, a domestic company pays 25% if its turnover or gross receipts in tax year 2024-25 (FY 2024-25) did not exceed ₹400 crore, and 30% otherwise. It can instead opt for 22% under section 200 of the Income-tax Act, 2025 by giving up most deductions. Surcharge and 4% cess apply on top. Foreign companies pay 35%.

What is the effective tax rate for a private limited company?

On the 22% regime, the effective rate is 25.17% at every income level, because a flat 10% surcharge and 4% cess apply. On the normal 25% rate, it is 26% up to ₹1 crore of income, 27.82% from ₹1 crore to ₹10 crore and 29.12% above. On the 30% rate, it is 31.2%, 33.38% and 34.94% for the same bands.

Is section 115BAA still available under the new Income-tax Act?

Yes, renumbered. The 22% option for domestic companies, earlier section 115BAA, is section 200 of the Income-tax Act, 2025 from tax year 2026-27. The conditions are the same: no additional depreciation, no SEZ deduction and no profit-linked deductions except the deductions for additional employee cost (old 80JJAA) and inter-corporate dividends (old 80M). An option exercised under 115BAA continues.

What is the MAT rate for 2026?

The Finance Act, 2026 cut minimum alternate tax under section 206 from 15% to 14% of book profit from tax year 2026-27. For companies on the normal regime, MAT is now a final tax and no new MAT credit arises. Companies on the 22% or 15% regimes do not pay MAT, and can use MAT credit brought forward from earlier years up to 25% of the tax payable for the year.

Does a small company with low profit pay less tax?

There is no basic exemption or slab structure for companies, so the rate applies from the first rupee of taxable income. A company with ₹5 lakh profit pays ₹1.3 lakh at 26% (25% plus cess). The lower 25% rate depends on turnover being within ₹400 crore, not on profit, and has nothing to do with the Companies Act definition of a small company.

Can a company switch back from the 22% regime?

No. Section 200(6) says an option under section 200, once exercised for any tax year, cannot be withdrawn for that or any later year. A company that has opted for 22% and later wants to claim additional depreciation or a profit-linked deduction cannot go back to the normal regime. That is why the choice needs a multi-year projection.

How are dividends from a company taxed in 2026?

Dividends are taxed in the shareholder's hands at the shareholder's own rate; the company pays no dividend distribution tax, which was abolished from 1 April 2020. From 1 April 2026, money received on a buyback of shares is taxed as capital gains rather than as dividend, and promoters pay an additional tax that lifts their effective rate to about 22% for promoter companies and 30% for other promoters.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Finance Act, 2026 (No. 4 of 2026) — section 3, section 50 and First Schedule Part I-B Paragraphs E and F — Ministry of Law and Justice (Legislative Department) · accessed 9 October 2026
2. 2.Income-tax Act, 2025 (Act 30 of 2025) — sections 199, 200, 201, 205 and 206 — Ministry of Law and Justice (Gazette of India, reproduced by TaxHeal) · accessed 9 October 2026
3. 3.Finance Bill 2026 — Memorandum explaining provisions (direct taxes) — Ministry of Finance (India Budget) · accessed 9 October 2026
4. 4.Objective and scope of the new Act (Income-tax Act, 2025) — FAQs — Income Tax Department (e-filing portal) · accessed 9 October 2026
5. 5.EY consolidated tax and policy alert — Union Budget 2026 — EY India · accessed 9 October 2026
6. 6.Note on corporate tax regimes applicable to domestic companies — DPNC Global · accessed 9 October 2026