Corporate Tax Returns Demystified: Key Information for Businesses

Corporate Tax Return (CTR) in India has undergone a huge transformation from the initial post-independence tax structure to the recently developed digitalized accounting system and tax incentives for businesses, thereby making the tax scenario in the country transparent, efficient, and globally competitive. Filing a CTR is an essential requirement for businesses operating in India, from local to foreign, to ensure compliance with the country’s tax laws and regulations.

This blog will take you through the entire CTR process, including who needs to file, key deadlines, as well as the detailed tax rates. In addition, it also highlights the common difficulties that businesses face during the filing process and the accruing penalties. By staying informed, businesses can streamline their filing process and adhere to the requirements and regulations of the country.

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What is a Corporate Tax Return?

Corporate Tax is a tax paid by entities on their income such as business profits, capital gains, other sources, or house property etc. which are liable to tax.

CTR is a comprehensive/detailed form filed by every company (domestic companies including private companies, public companies, and startups and foreign companies) encompassing details of computation of income and taxes (in form of advance tax or TDS/TCS or Self-Assessment tax) during the year to be furnished to the income tax authorities. 

Who is Required to File a Corporate Tax Return in India?

• Types of companies required to file (private limited, public limited, LLPs, etc.).

Every type of company is required to file the CTR including public companies, private companies and startups.

• Small businesses and startups – tax filing obligations: 

In the absence of any explicit relaxation to small businesses or startup from tax filing obligations, all the entities are required to file the tax returns by the stipulated due dates.

Important Deadlines and Penalties

• Due dates for filing returns:

• Late filing penalties and interest charges:
  If a company misses the filing deadline, it will incur penalties under Section 234F. These penalties vary based on the company’s total incom
• Income up to INR 5 lakh: INR 1,000 penalty
• Income exceeding INR 5 lakh: INR 5,000 penalty

In addition to this, interest will be charged under Section 234A at a rate of 1% per month on the unpaid tax, which can significantly increase the overall tax liability. Moreover, taxpayer would not be allowed to carry-forward the losses to the future years.

• Benefits of early tax filing:?

Timely filing would aid companies in receiving timely refunds and avoiding afore-mentioned interest and penalties. It also gives companies ample time to address and errors or issues that may arise.

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Corporate Tax Rates in India

India has a tiered tax system where the rate depends on the type of company and its turnover. Here’s a quick overview:

• Tax Rates for domestic companies and foreign companies:

• Tax Rates Based on Turnover: Comparison of tax rates for small, medium, and large businesses:

It is to be noted that small or medium companies having turnover up to INR 400 Crore in PY 2021-22 are taxed at the rate of 25% plus applicable surcharges and cess whereas the large companies are taxed at 30% as mentioned except in the cases of concessional tax regime. 

• Surcharges and Cess:

Different surcharges are applicable on entities based on their total income. 7% surcharge is applicable to entities whose total income is up to INR 1 Crore (2% in case of foreign companies) and 12% surcharge is applicable on entities having total income more than INR 1 Crore (5% in case of foreign companies).

Challenges Businesses Face When Filing Corporate Tax Returns

As mentioned above, CTR is a comprehensive form which encompasses various information such as company’s financial information, shareholder details, brought forward and carry forward losses, computation of taxes, etc. Hence, its filing and submission can be a complicated and meticulous task, particularly for big businesses or firms involving overseas operations. Some of the common challenges include.

• Complex tax calculations: In computing the tax liabilities, factors like the income sources, exemptions, deductions, and applicable rates should be considered, which makes it difficult to navigate.
• Improper claiming of deductions: Businesses often struggle with the proper allocation of tax deductions and exemptions, which in turn could mean overpaid taxes or difficulties in tax audits.
• Cross-border taxation: For companies operating overseas, taxation on foreign incomes and the subsequent adherence to double taxation avoidance agreements can be an imposing task.
• Losses and carry-forwards: Businesses with carry-forward losses or unclaimed tax credits may encounter obstacles while filing their return, especially if the opportunity to use these losses in future assessments is missed.

Therefore, we would be happy to help the corporate taxpayers in hassle free filing of the corporate tax return with accuracy and completeness meeting the stipulated deadlines by the income tax authorities.

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How Can We Help?

Our team of experienced professionals enable businesses to navigate the complexities of tax compliance effectively, thereby leading to substantial growth and improvement. Our efficient management streamlines the tax filing process, thereby reducing the risk of errors and penalties. 

Our services include:

• Collating and maintaining necessary documentation and supporting evidence for income tax filings.
• Identifying and applying for available tax credits and incentives to reduce the overall tax liability of the company.
• Assisting with tax compliance for international operations, including handling foreign income with respect to availing the benefit of double taxation avoidance agreements with the respective country.
• Preparing consolidated tax returns for groups of companies, including intercompany eliminations and adjustments.
• Submitting the corporate tax return before the due date to meet all regulatory requirements and to avoid penalty.
• Understanding and evaluating the tax positions in line with the judicial precedents.
• Answering queries or notices received from any tax authority and dealing with the issues that arise, if any.
• Re-filing amended tax returns if any amendment needs to be made in the previously filed returns.