The Income-tax Act, 2025 has governed income from 1 April 2026, with a single tax year in place of the previous year and assessment year, while the 1961 Act still governs earlier years. Domestic companies can opt for a 22% rate (plus surcharge and cess); foreign companies taxed on Indian income pay a 35% basic rate. GST is a dual central and state tax with rates of 5% and 18% for most supplies since 22 September 2025, and transfer pricing documentation and treaty paperwork are actively enforced.
The new income-tax law
The Income-tax Act, 2025 replaced the Income-tax Act, 1961 from 1 April 2026, and the Central Board of Direct Taxes notified the supporting Income-tax Rules, 2026 on 20 March 2026. Section numbers have changed throughout, so contracts, board papers and tax clauses that quote 1961 Act sections need updating.
The new Act uses a single tax year and applies from the 2026/27 year onward. Assessments and proceedings for earlier years continue under the 1961 Act, and carried-forward losses, unabsorbed depreciation and tax credits are preserved. A company is resident in India if it is an Indian company or its place of effective management in the year is in India.1234
Corporate rates, minimum alternate tax and withholding
A domestic company can opt for a 22% rate plus a 10% surcharge and 4% health and education cess, subject to conditions such as giving up certain incentives. A foreign company with a permanent establishment in India pays a 35% basic rate plus surcharge and cess. From 1 April 2026 the minimum alternate tax rate is 14%, and for companies that stay in the older regime it operates as a final tax with no new credit.
Payments to non-residents carry withholding under domestic law at 20% for dividends and for royalties and fees for technical services, with interest rates ranging from 5% to 20% depending on the instrument, before surcharge and cess. A lower treaty rate requires a tax residency certificate and the prescribed form, which is mandatory even where the certificate already contains the required details.56789
GST and state levies
GST is levied by the centre (CGST) and by states or union territories (SGST or UTGST) on supplies within a state, and by the centre as IGST on inter-state supplies and imports. Following the 56th GST Council meeting, most goods and services moved to a two-rate structure of 5% and 18% from 22 September 2025, with a 40% rate for a select few goods and services; certain tobacco and pan masala products stay at their earlier rates until compensation cess borrowings are repaid.
Registration is required above aggregate turnover thresholds that differ for goods and services and are lower in special category states. Stamp duty is mainly a state subject and rates differ by state, which affects share transfers, leases and many commercial agreements.10111213
Transfer pricing, returns and digital businesses
Companies with international transactions must obtain an accountant's transfer pricing report and file it a month before the return due date. A master file is required for Indian entities of groups with consolidated turnover above INR 5 billion where transaction thresholds are met, and country-by-country reporting applies to groups above INR 64 billion. Company returns are due by 31 October, or 30 November where transfer pricing applies, for a tax year running from 1 April to 31 March.
Non-residents can have a taxable business connection through significant economic presence, for example payments from India above INR 20 million in a year or interaction with 300,000 users in India. The equalisation levy on online advertising ended on 1 April 2025, so digital businesses now deal mainly with the income-tax nexus rules.14151617
| Item | Rate or threshold | Notes |
|---|---|---|
| Domestic company, optional regime | 22% | Plus 10% surcharge and 4% cess; conditions apply |
| Foreign company with permanent establishment | 35% basic rate | Plus surcharge of 0%, 2% or 5% and 4% cess |
| Minimum alternate tax | 14% from 1 April 2026 | Final tax for companies staying in the older regime |
| Withholding on dividends to non-residents | 20% | Domestic rate before surcharge and cess; treaty rate may be lower |
| Withholding on royalties and fees for technical services | 20% | Domestic rate before surcharge and cess; treaty rate may be lower |
| GST | 5% and 18%; 40% for a select few items | From 22 September 2025 |
| Master file | Group consolidated turnover above INR 5 billion | And specified transaction thresholds |
| Country-by-country report | Group consolidated turnover above INR 64 billion | Filed within 12 months of the reporting year-end |
How it works, step by step
- Obtain PAN and TAN for the company (available through SPICe+ at incorporation)18Income Tax Department via Ministry of Corporate Affairs
- Register for GST in each state where registration is triggered1112GST authorities (central and state)
- Collect tax residency certificates and the prescribed forms before paying non-residents at treaty rates9Income Tax Department
- Prepare the transfer pricing report, master file and country-by-country report where thresholds are met14Income Tax Department
- File the company return by 31 October, or 30 November where transfer pricing applies15Income Tax Department
No timings or fees are shown unless an official source states them.
Documents usually needed
- PAN and TAN allotment
- GST registration certificate for each state registration
- Tax residency certificates and prescribed treaty forms from non-resident payees
- Transfer pricing accountant's report and supporting benchmarking
- Master file and country-by-country report or notifications where applicable
Common mistakes
- Quoting Income-tax Act, 1961 section numbers in new contracts and policies after 1 April 2026.
- Applying a treaty withholding rate on the strength of a residency certificate alone, without the prescribed form.
- Forgetting that GST registration is state by state, so a new warehouse or office can trigger a separate registration.
- Assuming a foreign parent with no Indian office cannot have an Indian tax presence despite significant economic presence.
- Using pre-September 2025 GST rates in pricing and contracts.
When the business crosses borders
- Treaty relief depends on the residency certificate and the prescribed form, and the Supreme Court has treated the certificate as an eligibility condition rather than conclusive proof, so substance in the treaty country matters.
- Where surcharge and cess apply to domestic withholding rates, they are not added on top of a treaty rate.
- Foreign companies supplying capital equipment or tooling to contract manufacturers in bonded customs zones have a time-limited exemption under the Finance Act, 2026.
Questions businesses ask
Which income-tax law applies to our 2025/26 accounts?
The Income-tax Act, 1961 continues to govern years before 2026/27. The Income-tax Act, 2025 applies from the tax year beginning 1 April 2026.13
Is a subsidiary or a branch taxed more heavily?
A domestic subsidiary can opt for the 22% rate plus surcharge and cess, while a foreign company taxed through a branch pays a 35% basic rate. Dividends paid by the subsidiary carry withholding, so the full comparison depends on profit extraction plans and treaty rates.568
Has India implemented the global minimum tax?
We could not confirm from an official source whether India has legislated Pillar Two rules. Check the current position before relying on any assumption.
What this guide does not yet confirm
These points need checking with a qualified local professional in India before you rely on them.
- Pillar Two status (income inclusion rule, domestic minimum top-up tax) was not confirmed on an official source.
- Section numbers of the Income-tax Act, 2025 for the concessional company rate, non-resident rates, withholding and transfer pricing could not be mapped: the official comparison utility did not render.
- Statutory audit requirements under the Companies Act, 2013, Ind AS applicability thresholds and the deadlines for filing financial statements and annual returns with the Ministry of Corporate Affairs were not source-checked.
- Tax audit turnover thresholds under the new Act were not confirmed.
- Most rates come from PwC Worldwide Tax Summaries (last reviewed 11 May 2026), not the Act or Finance Act text; confirm against the official tax reference tables.
- GST registration thresholds were confirmed only on a secondary source.
Sources and review status
Each statement is numbered to the source it was checked against. We use official sources where we can, and each statement says whether it was checked against an official or a secondary source. Sources last checked on 19 October 2026. None of it has been professionally reviewed yet: it is research checked against official and secondary sources by WONE Global, not legal or tax advice.
The Income-tax Act, 2025 came into force on 1 April 2026, replacing the Income-tax Act, 1961. Central tax. The Act received presidential assent on 21 August 2025.
The Central Board of Direct Taxes notified the Income-tax Rules, 2026 and new forms on 20 March 2026 to operationalise the Income-tax Act, 2025. Central tax.
Secondary sources refer to the 'Income-tax Rules, 2025'; the Income Tax Department press release and site use 'Income-tax Rules, 2026'.
The Income-tax Act, 2025 replaces the previous year and assessment year with a single tax year and applies from tax year 2026/27, while the 1961 Act continues to govern assessments for earlier years and carried-forward losses, unabsorbed depreciation and tax credits are preserved. Central tax.
Secondary source (last reviewed 11 May 2026); the official transition FAQs could not be fetched.
Under section 6 of the Income-tax Act, 2025 a company is resident in India if it is an Indian company or its place of effective management in the year is in India. Central tax.
A domestic company may opt for a corporate income tax rate of 22% plus a 10% surcharge and 4% health and education cess, subject to conditions. Optional regime for domestic companies. Otherwise basic rates of 25% (turnover up to INR 4 billion in the reference year) or 30% apply. Central tax.
Secondary source (last reviewed 11 May 2026); the Act's rate provisions could not yet be checked on an official page.
A foreign company with a permanent establishment in India is taxed at a basic rate of 35%, plus surcharge of 0%, 2% or 5% depending on income and 4% health and education cess. Foreign companies taxed on Indian business income. Central tax.
Secondary source (last reviewed 11 May 2026).
From 1 April 2026 the minimum alternate tax rate is 14%, and for companies that remain in the older regime it operates as a final tax with no new credit accruing. Concessional 9% rate continues for eligible IFSC units. Central tax.
Secondary source reflecting the Finance Act, 2026.
Under domestic law, withholding on payments to non-residents is 20% on dividends and 20% on royalties and fees for technical services, and between 5% and 20% on interest depending on the instrument, before surcharge and cess. Treaty rates may be lower; surcharge and cess are not added on top of a treaty rate. Central tax.
Secondary source (last reviewed 11 May 2026).
To claim a treaty withholding rate, a non-resident must provide a valid tax residency certificate and the prescribed form, which is mandatory even if the certificate already contains the required information. Central tax. The Supreme Court has treated the certificate as an eligibility condition rather than conclusive proof of treaty entitlement.
Secondary source; the prescribed form number under the 2026 Rules was not confirmed.
From 22 September 2025 GST moved to a two-rate structure of 18% (standard) and 5% (merit), with a special 40% rate for a select few goods and services. Pan masala, gutkha, cigarettes, chewing tobacco, unmanufactured tobacco and bidi stay at earlier GST and compensation cess rates until compensation cess loans are repaid. Central and state GST together.
The press release records the Council's recommendations; the implementing rate notifications could not yet be checked.
GST is levied as CGST by the centre and SGST or UTGST by states or union territories on intra-state supplies, and as IGST by the centre on inter-state supplies, including imports. Dual central and state tax.
Secondary source (last reviewed 11 May 2026).
GST registration is required where annual aggregate turnover exceeds INR 2 million (INR 1 million in special category states), with a threshold of INR 4 million for persons making only intra-state supplies of goods, subject to exceptions. Composition scheme available up to INR 15 million turnover without input tax credit. Thresholds differ by state category.
Secondary source; some categories (for example non-resident taxable persons and inter-state suppliers) must register regardless of turnover under GST law, which was not confirmed here.
Stamp duty is mainly a state subject in India, so rates differ between states, while the central government fixes rates for specified instruments. State levy on instruments such as share transfers, leases and agreements; central rates for specified instruments.
Secondary source (last reviewed 11 May 2026).
A transfer pricing master file is required for Indian entities of groups with consolidated turnover above INR 5 billion where transaction thresholds are met, and country-by-country reporting applies to groups with consolidated turnover above INR 64 billion. An accountant's transfer pricing report is also required for international and specified domestic transactions, filed one month before the return due date. Central tax.
Secondary source (last reviewed 11 May 2026); the country-by-country threshold was previously INR 55 billion.
The Indian tax year runs from 1 April to 31 March, and companies must file their return by 31 October after the tax year, or by 30 November where transfer pricing provisions apply. Central tax. Advance tax is payable in instalments by 15 June, 15 September, 15 December and 15 March.
Secondary source (last reviewed 11 May 2026).
India's equalisation levy has been abolished: the levy on online advertising services ended on 1 April 2025 and the levy on non-resident e-commerce operators ended on 1 August 2024. Central levy.
Secondary source.
A non-resident has a significant economic presence, and so a business connection in India, where payments from persons in India in a year exceed INR 20 million or it systematically and continuously solicits business from or interacts with 300,000 users in India. Only income attributable to those transactions or activities is taxable in India; treaty protection may apply. Central tax.
Secondary source (last reviewed 11 May 2026).
SPICe+ is the Ministry of Corporate Affairs' integrated web form for incorporating a company, with Part A for name reservation and Part B covering incorporation, director identification numbers, PAN and TAN, EPFO and ESIC registration, GSTIN and opening a bank account, filed with linked eMoA, eAoA and AGILE-PRO-S forms. Professional tax registration through the form applies to new companies in Maharashtra and Karnataka only (a state-level registration). Central filing.
Questions on this topic
17 statements on tax, accounting and statutory reporting in India
