Taxation in India

The taxation system in India is applicable to both natural persons and corporate entities. Foreign investors who want to register a company in India are liable to taxation, depending on the legal entity chosen for incorporation, as well as on the business field in which the company activates. At the same time, the tax level to which a company is liable can also vary, if the respective corporate entity is the beneficiary of a double taxation treaty signed by the Indian representatives. Our team of specialists in company registration in India can advise on the tax system applicable here, which is comprised of direct and indirect taxes.

Direct taxes in India 

India imposes on natural persons and legal entities a set of direct taxes. These types of taxes describe the fact that they are imposed and paid directly to the Indian Government. When relocating or starting a company in India, foreigners should know that the following taxes fall under this category:

• corporate tax;

• capital gains tax;

• securities transaction tax;

• income tax; 

• tax on perquisites (taxed as part of salary income). 

The income tax is applicable to most of the persons who have a taxable income in India and it is imposed depending on the overall income, ranging from 5% to 30% (with no tax on the first INR 4 lakh under the default new regime), plus surcharge and 4% cess. However, certain categories of income are exempt from taxation. 

The corporate tax is available for companies operating in India and it is imposed on a yearly basis under the Income-tax Act, 2025, which replaced the Income-tax Act, 1961 from 1 April 2026. The rate at which the corporate tax is imposed depends on the company’s tax residency. For example, domestic companies benefit from a lower tax rate (22% under the optional concessional regime, or 25%/30% under the normal regime), while a foreign company is imposed with a tax rate of 35% (plus surcharge and 4% cess). The tax level in these cases can also vary depending on the company’s total income and our team of agents can advise on this matter. 

Indirect taxes in India  

Indirect taxes are not directly paid to the Indian government. Instead, they are imposed for goods and products traded here. Amongst the numerous aspects that should be completed by those interested in how to form a company in India, several refer to the registration for tax purposes, which refer to the following: 

• goods and services tax (GST), which in 2017 replaced VAT, service tax and most excise duties, with main rates of 5% and 18% and a 40% rate for luxury and sin goods since 22 September 2025;

• customs duty;

• excise duty (now only on certain petroleum products, tobacco and alcohol);

• state VAT/sales tax (only on petroleum products and alcohol for human consumption);

• service tax (abolished and subsumed into GST in 2017). 

Other taxes can apply and foreigners are invited to contact our team of consultants in company formation in India for more details.