Income Tax Slabs for Domestic Companies – Rates, Surcharge, and MAT for FY 2025-26

Corporate tax in India has been dramatically simplified and reduced since 2019 — the introduction of the 22% concessional regime for existing companies and 15% for new manufacturers fundamentally changed the corporate tax landscape. Understanding which regime applies to your company, and what the complete tax liability calculation looks like, is essential for directors, accountants, and business partners planning home loans and personal finances alongside corporate operations.

This page covers:

• Income tax rates for domestic companies — three regimes
• Standard 30% rate — for companies not opting for concessional regime
• Section 115BAA — 22% concessional rate for domestic companies
• Section 115BAB — 15% rate for new manufacturing companies
• Surcharge on company income
• Minimum Alternate Tax (MAT) — what it is and when it applies
• MAT credit — how to carry it forward
• Income tax return for companies — Form ITR-6
• How company taxation affects directors' personal home loan applications

A domestic company under the Income Tax Act is an Indian company (incorporated in India) or a foreign company that has been declared a domestic company for tax purposes (rare). Domestic companies are taxed on their worldwide income — unlike foreign companies, which are taxed only on Indian-sourced income.
 

Three main tax regimes apply to domestic companies:

1. Standard regime (30%) — for companies that do not opt for the concessional rate
2. Section 115BAA (22%) — concessional rate for all domestic companies, subject to conditions
3. Section 115BAB (15%) — concessional rate for new domestic manufacturing companies, subject to strict conditions

The standard income tax rate for domestic companies is 30% of net profit. Key characteristics:

• All common deductions (depreciation, business expenses) available
• Chapter VI-A deductions (80C, 80G, etc.) available in some cases
• MAT at 15% applies if standard tax is lower
• Surcharge applies for higher income

Introduced in 2019, Section 115BAA allows any domestic company to opt for 22% tax rate (effective rate approximately 25.17% including surcharge and cess) subject to:
 

Conditions:

• No deductions under Chapters VI-A (except Section 80JJAA for employment of new employees)
• No deduction for Section 10AA (SEZ units)
• Depreciation as per Section 32 is allowed
• No set-off of prior losses related to deductions not allowed under this regime
• The option is exercised before the due date of the first ITR under this regime and is irrevocable
   

Benefit: No MAT. Companies paying 22% are exempt from Minimum Alternate Tax, simplifying tax compliance significantly.

For new domestic manufacturing companies set up on or after 1 October 2019 and starting manufacturing on or before 31 March 2024 (deadline may have been extended — verify):
 

Tax rate: 15% base (effective approximately 17.01% including surcharge and cess)
 

Strict conditions:

• Must not be formed by splitting up or reconstruction of existing business
• Must not use plant/machinery previously used
• Manufacturing must actually be the primary business activity
• Cannot opt if deductions under specified sections have been claimed

Health and Education Cess: 4% of (income tax + surcharge), applicable under all regimes.

MAT under Section 115JB ensures that companies with high book profits (but low taxable income due to deductions and exemptions) pay a minimum tax of 15% on book profit.

How it works

• Calculate regular income tax (30% of net income)
• Calculate MAT (15% of book profit)
• Pay whichever is higher
• MAT credit: The excess of MAT over regular tax becomes an MAT credit, usable in years when regular tax exceeds MAT (for up to 15 years)

Companies under Section 115BAA or 115BAB are fully exempt from MAT — this is one of the primary incentives to opt for these concessional regimes.

Domestic companies file ITR-6 annually. Tax audit under Section 44AB is mandatory for companies with turnover above Rs. 1 crore (Rs. 10 crore if cash transactions are minimal), requiring a CA's audit and report. Due date for tax-audit companies: 31 October of the assessment year (31 October 2026 for FY 2025-26).

Company directors applying for home loans are assessed as self-employed individuals. Key considerations:

• Company profit (even if not distributed as salary or dividend) is not personal income for the director — only documented director salary, sitting fees, dividends, or rent from the company count as personal income
• Consistently filed personal ITR-3 with stable director salary is the primary income documentation
• Company's financial health (demonstrated through company ITR-6 and P&L) supplements the personal application picture
• Directors of 115BAA companies that have reduced their tax liability may have lower documented personal income if they take less salary — this directly impacts home loan eligibility

Bajaj Finance offers home loans from 7.25% p.a.* with amounts up to Rs. 15 Crore* and tenures up to 32 years. Check your eligibility today.

Understanding domestic company tax rates — and which regime your company operates under — is foundational for business tax planning, director personal finance, and accurately assessing the company's overall cost of doing business in India.