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 formation 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;
• prerequisite tax.
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 10% to 30% of the respective sum. 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. 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 (30%), while a foreign company is imposed with a tax rate of 40%. 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:
• value added tax;
• customs duty;
• excise duty;
• sales tax;
• service tax.
Other taxes can apply and foreigners are invited to contact our team of consultants in company formation in India for more details.