Tax Rates applicable to a Foreign Company (A.Y. 2017-2018 i.e. F.Y. 2016-2017)
A foreign company is taxed at a flat rate of 40%. Apart from tax @ 40%, Education Cess is levied @ 2% of income-tax and Secondary and higher Education Cess is levied @ 1% of income-tax.
Surcharge : In addition to tax at above rate, surcharge is levied @ 2% on the amount of income-tax if net income exceeds Rs. 1 crore but does not exceed Rs. 10 crore and @ 5% on the amount of income-tax if net income exceeds Rs. 10 crore. In a case where surcharge is levied, EC of 2% and SHEC of 1% will be levied on the amount of income-tax plus surcharge.
However, marginal relief is available from surcharge in such a manner that in the case of a foreign company whose net income exceeds Rs. 1 crore but does not exceed Rs. 10 crore the amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
In case of a foreign company whose net income exceeds Rs. 10 crore, marginal relief is available from surcharge in such a manner that the amount payable as income-tax and surcharge shall not exceed the total amount payable as income-tax and surcharge on total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.MAT : In the case of a corporate taxpayer to whom the provisions of Minimum Alternate Tax (MAT) applies, tax payable cannot be less than 18.5% (+SC+EC+SHEC) of "Book profit" as per section 115JB. For provisions relating to MAT refer tutorial on “MAT/AMT” in tutorial section.
