Corporate Income Tax Rates India FY 2026-27: 22% vs 15% vs 30%

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Corporate Tax Rate Structure in India (FY 2026-27)

Here's a quick visual comparison of all three corporate tax options:

Corporate Tax Regimes Comparison — FY 2026-27

Section 115BAA22%(Base Rate)Who qualifies:✓ Any domestic company✓ Opting out of exemptionsConditions:✗ No Section 80IC (SEZ)✗ No Section 80IE (Infrastructure)✗ No Section 80IA (Industrial)✗ No MAT credit carryforwardEffective Rate:22% + Surcharge + 4% H&E cess= 25.17%(if net income < ₹1Cr)Best for:• Standard manufacturing• Service companies• Consulting firms• IT/ITES (no SEZ benefit)• Most applicable optionSection 115BAB15%(New Manufacturing)Who qualifies:✓ Incorporated after Oct 1, 2019✓ Manufacturing business✓ Production by Mar 31, 2023*Conditions:✗ Production deadline extended✗ Check latest extensionEffective Rate:15% + Surcharge + 4% H&E cess= 17.67%(if net income < ₹1Cr)Best for:• New manufacturing units• EV/renewable energy• Electronics/semiconductors• PLI scheme companies• Highest savings (7% vs 115BAA)General Regime30%(Standard)Who uses this:✓ Companies claiming exemptions (80IC, 80IE, etc.)✓ Older companies✓ Not eligible for 115BAA/BABConditions:✓ Can claim all exemptions✓ MAT credit availableEffective Rate:30% + Surcharge + 4% H&E cess= 34.944%(if net income < ₹1Cr)Best for:• SEZ units (80IC)• Infrastructure (80IE)• Startups/hubs (80IAC)• Electricity/hospitals (80IA)• Highest tax if no exemptions

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Detailed Explanation of Each Regime

Section 115BAA: The 22% Regime (Most Common)

What is it? A corporate tax rate of 22% + surcharge + 4% H&E cess, giving an effective rate of ~25.17%. Available to any domestic company that opts OUT of specific exemptions.

Eligibility: Any domestic company incorporated at any time.

The Trade-off:

• ✓ Lowest rate among all regimes (except Section 115BAB)
• ✓ Simplifies compliance (no exemption claims)
• ✓ Irreversible for 10 consecutive AYs — no going back
• ✗ Cannot claim exemptions under Sections 80IC (SEZ), 80IE (Infrastructure), 80IA (Industrial)
• ✗ Cannot carry forward MAT credit from prior years

Surcharge on 115BAA (as of FY 2026-27):

(Note: 4% H&E cess applies on tax + surcharge)

Example calculation (net income ₹50 lakhs):

Net Profit: ₹50,00,000
Tax @ 22%: ₹11,00,000
Surcharge @ 7%: ₹77,000
Tax + Surcharge: ₹11,77,000
H&E Cess @ 4%: ₹47,080
Total Tax: ₹12,24,080

Effective rate: 24.48%

Best for:

• IT/ITES companies (no SEZ exemption)
• Service providers
• Consulting firms
• Manufacturing without exemption benefit
• Most domestic companies (default option)

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Section 115BAB: The 15% Regime (New Manufacturing)

What is it? A 15% tax rate available exclusively to new manufacturing companies. This is the lowest corporate tax rate in India.

Eligibility (strict conditions):

1. Company must be incorporated on or after October 1, 2019
2. Business must be manufacturing (not trading, services, or finance)
3. Production must have commenced by March 31, 2023 (deadline may be extended; verify current status)

The 15% rate vs 22%:

• Saving: 7 percentage points = ₹3.5 lakhs per ₹50 lakh profit
• Effective rate after surcharge/cess: ~17.67%
• Critical: This option is irreversible for 10 AYs

Surcharge on 115BAB (as of FY 2026-27):

Example calculation (net income ₹50 lakhs):

Net Profit: ₹50,00,000
Tax @ 15%: ₹7,50,000
Surcharge @ 7%: ₹52,500
Tax + Surcharge: ₹8,02,500
H&E Cess @ 4%: ₹32,100
Total Tax: ₹8,34,600

Effective rate: 16.69%
Saving vs 115BAA: ₹3,89,480 annually!

Eligible manufacturing sectors:

• ✓ Electronics (PLI scheme priority)
• ✓ Semiconductors
• ✓ EVs and batteries
• ✓ Renewable energy (solar panels, wind turbines)
• ✓ Pharmaceutical
• ✓ Engineering goods
• ✓ Textiles
• ✓ Steel (excluding trading)

Not eligible:

• ✗ Trading of goods (even if manufacturer-authorized distributor)
• ✗ Service providers
• ✗ Finance/insurance
• ✗ E-commerce (unless also manufacturing)

Critical timeline check: As of June 2026, verify production deadline extension via CBDT notification.

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General Regime: 30% + Exemptions

What is it? The default 30% tax rate available to companies claiming exemptions under Sections 80IC, 80IE, 80IA, 80IAC, etc.

Eligibility: Any company, anytime. No restrictions.

Surcharge (General Regime):

Key exemptions available (only in general regime, not 115BAA/BAB):

MAT (Minimum Alternate Tax) — Only under general regime:

If your company has high deductions (depreciation, exemptions) and low taxable income, MAT applies:

• Rate: 15% on book profit (per Schedule VI financial statements)
• Only applies if MAT > regular income tax
• Benefit: Can carry forward MAT credit for 15 years

Example (SEZ manufacturing company):

Gross Profit: ₹1,00,00,000
Less Depreciation, deductions: ₹80,00,000
Taxable Income: ₹20,00,000
Tax @ 30%: ₹6,00,000
Book Profit (Schedule VI): ₹30,00,000
MAT @ 15%: ₹4,50,000

Whichever is higher applies: ₹6,00,000 (regular tax)
MAT credit available: ₹4,50,000 (carry forward)

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How to Choose the Right Regime: Decision Matrix

Which Tax Regime Should You Choose?

Q1: Was your company incorporated after October 1, 2019?AND is it actively manufacturing (with production commenced)?YES → Section 115BAB15% (Lowest rate)NO → Continue to Q2(Older company or not manufacturing)Q2: Are you claiming exemptions under Section 80IC, 80IE, 80IA, or 80IAC?(SEZ, infrastructure, industrial, startup hub)YES → General Regime30% (with exemption benefit)NO → Section 115BAA22% (Standard for most companies)📌 KEY POINTS:1. This choice is IRREVERSIBLE for 10 consecutive AYs — once you opt for 115BAA, you cannot switch back.2. Effective rates (including surcharge + H&E cess): 115BAB (16.64%) | 115BAA (25.17%) | General (33.24%)3. If you have exemptions but profit is low, MAT (15% on book profit) might apply under General Regime.4. Consult a CA BEFORE incorporation — the choice affects 10 years of tax liability.5. Most IT/consulting companies = 115BAA. Most manufacturing startups = 115BAB (if eligible).

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Worked Examples: 115BAA vs 115BAB vs General

Scenario 1: IT Services Company (₹2 crore profit)

Company: Incorporated 2024, IT consulting (no manufacturing), no exemptions

Option A: Section 115BAA (22%)

Net Profit: ₹2,00,00,000
Tax @ 22%: ₹44,00,000
Surcharge @ 12% (on tax): ₹5,28,000
Tax + Surcharge: ₹49,28,000
H&E Cess @ 4%: ₹1,97,120
TOTAL TAX: ₹51,25,120
Effective rate: 25.63%

Option B: Section 115BAB — NOT ELIGIBLE (not manufacturing)

Option C: General Regime (30%) — WORSE than 115BAA

Tax: ₹30,00,000 + surcharge ₹3,60,000 + cess = ₹37,44,000
Effective rate: 34.94%

✓ Recommendation: Section 115BAA (only eligible option, saves ₹6,18,880 vs general)

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Scenario 2: EV Battery Manufacturing (₹2 crore profit)

Company: Incorporated 2021, battery manufacturing, production in 2022, no exemptions

Option A: Section 115BAA (22%)

TOTAL TAX: ₹51,25,120 (same as above)
Effective rate: 25.63%

Option B: Section 115BAB (15%) — ELIGIBLE ✓

Net Profit: ₹2,00,00,000
Tax @ 15%: ₹30,00,000
Surcharge @ 12%: ₹3,60,000
Tax + Surcharge: ₹33,60,000
H&E Cess @ 4%: ₹1,34,400
TOTAL TAX: ₹34,94,400
Effective rate: 17.47%
SAVING: ₹16,30,720 annually! (7.16% savings)

Option C: General Regime — WORSE

✓ Recommendation: Section 115BAB (immediate saving of ₹16+ lakhs/year for 10 years = ₹1.6+ crore total)

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Scenario 3: SEZ Manufacturing Company (₹2 crore profit)

Company: Incorporated 2015, manufacturing in SEZ, claiming 80IC exemption

Option A: Section 115BAA — NOT RECOMMENDED

Tax: ₹51,25,120
(Cannot claim 80IC exemption benefit; wasted advantage)

Option B: Section 115BAB — NOT ELIGIBLE (incorporated before Oct 2019)

Option C: General Regime (30%) with 80IC Exemption — BEST

Gross Profit: ₹3,00,00,000 (assume)
Less 80IC deduction: ₹1,00,00,000 (per exemption rules)
Taxable Income: ₹2,00,00,000
Tax @ 30%: ₹60,00,000
Surcharge @ 12%: ₹7,20,000
Tax + Surcharge: ₹67,20,000
H&E Cess @ 4%: ₹2,68,800
TOTAL TAX: ₹69,88,800
Effective rate: 24.99% (after exemption benefit)

Effective rate WITHOUT exemption (115BAA): 25.63%
Effective rate WITH exemption (General): 24.99%
SAVING with exemption: ₹1,36,320

✓ Recommendation: General Regime (claim 80IC exemption to reduce effective rate below 115BAA)

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Foreign Company Tax Rate

If your parent/subsidiary is a foreign company operating in India:

Tax Rate: 40% + surcharge + 4% H&E cess = ~44% effective rate

Foreign company = incorporated outside India, earning India-source income

Key points:

• ✗ Higher rate than domestic (40% vs 22%)
• ✗ Cannot opt for 115BAA or 115BAB
• ✗ Must file ITR-4 (company return)
• ✓ Eligible for deductions under sections 80IA/80IE if criteria met

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FAQ

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Source Attribution

This guide is based on:

• Finance Act 2020, 2023, 2024, 2025 — Sections 115BAA and 115BAB
• CBDT Notifications & Circulars — gst.gov.in and cbdt.gov.in
• Schedule VI (Accounting Standards) — MAT book profit calculation
• RBI Regulations — Foreign company tax compliance
• ICAI Guidelines — Corporate tax rate amendments

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Internal Linking

• Corporate ITR Filing Guide
• Tax Audit for Companies Section 44AB
• Depreciation Rates Income Tax Act
• Corporate Compliance & ROC Filings