India Private Limited Company Tax: Corporate Tax, GST and Compliance in 2026
Complete guide to Private Limited Company taxation in India: 22% corporate tax under Section 115BAA, 18% GST standard rate, TDS obligations and mandatory compliance filings. With examples in INR.
Quick Answer
An Indian Private Limited Company pays corporate income tax at 22% under Section 115BAA (plus 10% surcharge and 4% health/education cess, effective 25.17%) or 15% for new manufacturing companies under Section 115BAB. GST is 18% for most services and many goods. Companies must also deduct TDS (Tax Deducted at Source) from vendor payments, file monthly GSTR-3B, and quarterly GSTR-1.
India's corporate tax framework has gone through significant restructuring since 2019. The introduction of the optional Section 115BAA and 115BAB regimes brought headline rates in line with global competitors, but the compliance layer — GST filings, TDS deductions, ROC annual returns, advance tax instalments — remains substantial. This guide covers what Private Limited Company directors and founders actually need to know in 2026.
Corporate income tax: two regimes to choose from
Every Indian Private Limited Company chooses between the legacy regime (with exemptions and deductions) and one of two newer flat-rate regimes. The choice is irrevocable once made, so it matters.
Section 115BAA — 22% for all domestic companies
Introduced in September 2019, Section 115BAA allows any domestic company to opt for a 22% flat rate, giving up most deductions and exemptions in return.
| Component | Rate |
|---|---|
| Base corporate income tax rate | 22% |
| Surcharge | 10% of tax |
| Health and education cess | 4% of (tax + surcharge) |
| Effective rate | 25.17% |
The surcharge applies uniformly at 10% regardless of income level for companies under 115BAA, which is a significant simplification over the legacy regime where surcharges varied by net income band.
To elect 115BAA, a company files Form 10-IC before or with the first return in which the election applies. The key trade-offs: you give up deductions under Chapter VIA (80C, 80IC, 80IE and most investment-linked incentives), you cannot set off brought-forward losses or depreciation that were generated under the old regime, and you forfeit accelerated depreciation under Section 32AC/32AD. In exchange, you get certainty: flat rate, no AMT exposure (Alternate Minimum Tax is not applicable under 115BAA), and predictable tax planning.
For most service-based founders, technology companies, and professional services firms, 115BAA makes sense. The deductions foregone are rarely material for these business types.
Section 115BAB — 15% for new manufacturing companies
Section 115BAB was introduced to incentivise domestic manufacturing under the Make in India initiative. The effective rate including surcharge and cess is 17.01%.
| Component | Rate |
|---|---|
| Base rate | 15% |
| Surcharge | 10% of tax |
| Health and education cess | 4% of (tax + surcharge) |
| Effective rate | 17.01% |
The conditions are strict:
- Company must be incorporated on or after 1 October 2019
- Must commence manufacturing or production before 31 March 2024 (this deadline was extended multiple times; verify the current position with your tax advisor as further extensions are possible under Finance Acts)
- Must not be formed by splitting up or reconstruction of an existing business
- Must not use previously used plant and machinery (subject to limited exceptions)
- Must not be engaged in business other than manufacturing or production of an article or thing and research related to it
For manufacturing startups established within the eligibility window, the rate advantage over the standard regime is material. For a service company or a trading company, 115BAB is not available.
The legacy regime — still relevant for some companies
The old regime taxes domestic companies at 30% (with a 7% surcharge on net income between INR 1 crore and INR 10 crore, 12% above INR 10 crore, plus 4% cess) but allows the full suite of deductions: Chapter VIA incentives, SEZ benefits, export-linked deductions, carried-forward losses, and full accelerated depreciation.
For companies with significant eligible deductions — SEZ units, R&D-intensive businesses with weighted deduction claims, companies in the early years with large depreciation pools — the legacy regime may still produce a lower effective tax than 25.17%. A one-time calculation at the point of election is usually warranted.
Most founder-led Private Limited Companies do not have enough deductions to make the legacy regime worthwhile and elect 115BAA.
Worked example: a Private Limited Company with INR 50 lakh turnover
Take a technology services company, incorporated in 2022, operating from Bengaluru, with INR 50,00,000 (INR 50 lakh, approximately ÂŁ47,500 / USD 60,000) in annual turnover. The company has elected Section 115BAA.
| Item | Amount |
|---|---|
| Annual turnover | INR 50,00,000 |
| Total expenses (salaries, rent, cloud infra, vendor costs) | INR 32,00,000 |
| Taxable profit | INR 18,00,000 |
| Corporate tax at 22% | INR 3,96,000 |
| Surcharge at 10% of tax | INR 39,600 |
| Health and education cess at 4% | INR 17,424 |
| Total corporate income tax | INR 4,53,024 |
| Effective rate on profit | 25.17% |
In addition to corporate income tax, the company has ongoing GST and TDS obligations throughout the year (covered below). These are not taxes on profit but affect working capital and require their own compliance calendar.
GST: India's multi-slab indirect tax system
The Goods and Services Tax, introduced in July 2017, replaced a fragmented web of central and state indirect taxes. It applies to the supply of goods and services, with rates depending on the category of supply.
GST rate slabs
| Rate | What it applies to |
|---|---|
| 0% (exempt) | Essential food items (unprocessed cereals, milk, eggs, vegetables), education services, healthcare, public transport |
| 5% | Packaged food items, household goods (sugar, edible oils, spices), economy class air travel, textile fabric (basic), restaurant services without AC |
| 12% | Processed food, business class air travel, mobile phones, computers |
| 18% | Most professional and business services (IT services, consulting, legal, accounting, marketing), most goods not in other slabs, hotels with tariff INR 7,500+, restaurant services with AC |
| 28% | Luxury and sin goods: automobiles, motorcycles, tobacco, aerated drinks, cement, paint, air conditioning units, casinos, online gaming |
For most technology companies and professional services businesses, the relevant rate is 18%. That means if your company invoices a client INR 1,00,000 for services, GST of INR 18,000 is added, making the total invoice INR 1,18,000. You collect the GST, hold it, and remit it to the government.
The mechanism is the Input Tax Credit (ITC) system: you pay GST on your inputs (office rent, software, professional services you buy), and you can offset those credits against the GST you collect on your sales. Only the net amount is remitted to the government.
GST registration threshold
GST registration is mandatory once aggregate annual turnover crosses INR 20 lakh (INR 10 lakh for certain special category states). There is no choice once you pass the threshold: you must register, charge GST on your sales, and file returns.
A Private Limited Company providing services in excess of INR 20 lakh per year — which covers almost every active company — is required to be GST registered. Most incorporate after already exceeding this threshold or cross it quickly.
For companies making inter-state supplies (selling to clients in a different state), registration is mandatory regardless of turnover.
For exports of services (zero-rated supplies), GST is charged at 0% but the company must still be GST registered and can claim a refund of ITC on inputs.
GST compliance calendar
Once registered, the standard filing obligations are:
| Return | Frequency | Due date | What it covers |
|---|---|---|---|
| GSTR-3B | Monthly | 20th of following month | Summary return: outward and inward supplies, ITC claim, tax payment |
| GSTR-1 | Quarterly (for businesses up to INR 5 crore turnover) or monthly | 13th of following month (monthly); 30th or 31st after quarter (quarterly) | Outward sales invoice details |
| GSTR-9 | Annual | 31 December following the financial year | Annual reconciliation of all monthly/quarterly filings |
A company with turnover up to INR 5 crore (approximately £47,500 / USD 60,000 — the common case for many small Private Limited Companies) can opt for QRMP (Quarterly Return Monthly Payment), where full GSTR-1 is filed quarterly but tax is paid monthly via a simplified challan. This reduces the quarterly GSTR-1 burden while keeping cash flow aligned.
TDS: Tax Deducted at Source
TDS is a mechanism where the payer withholds income tax at source when making certain payments and deposits it directly with the government. The recipient gets credit for the TDS withheld when filing their own income tax return.
For a Private Limited Company, TDS is a dual obligation: you are a deductor (you must withhold TDS on qualifying payments you make to vendors, employees, contractors) and a deductee (your clients withhold TDS on payments they make to you).
Why TDS exists
The government collects tax earlier in the transaction chain, reducing evasion and improving cash flow for the exchequer. For the company being paid, TDS is not a cost — it is an advance payment of that company's own income tax, creditable against the final tax liability.
Common TDS rates for company payments
| Payment type | TDS rate |
|---|---|
| Salary to employees | As per individual income tax slab |
| Professional / technical services fees | 10% |
| Rent (plant and machinery) | 2% |
| Rent (land, building, furniture) | 10% |
| Contractor payments (single contract >INR 30,000 or annual >INR 1,00,000) | 1% (individuals/HUF) / 2% (companies) |
| Commission or brokerage | 5% |
| Interest to residents other than banks | 10% |
| Dividends | 10% |
| IT software purchases / services | 10% (Section 194J) |
These apply when the payment crosses the threshold for that category (for example, professional fees TDS applies when aggregate payments in the year exceed INR 30,000 to a single vendor).
TDS compliance obligations
Once you have deducted TDS:
- Deposit by the 7th of the following month (for most payments). TDS deducted in March must be deposited by 30 April.
- File quarterly TDS returns (Forms 24Q for salaries, 26Q for other payments) within 31 days of quarter end (Q1-Q3) or 31 May (Q4).
- Issue TDS certificates (Form 16 for employees, Form 16A for others) to the deductee after each quarter/year.
Failure to deduct TDS or to deposit it on time attracts interest at 1% per month (for failure to deduct) and 1.5% per month (for failure to deposit after deducting), plus penalties. The expense is also disallowed in the payer's tax return if TDS was not deducted.
For a company with employees and multiple vendors, TDS quickly becomes a significant monthly compliance task.
Advance tax: paying your own tax in instalments
A Private Limited Company is required to pay corporate income tax in advance during the financial year itself, not just after the year ends. This applies when the total estimated tax liability for the year exceeds INR 10,000.
Advance tax instalment schedule
| Instalment | Due date | Amount to have paid by this date |
|---|---|---|
| 1st | 15 June | 15% of total estimated tax |
| 2nd | 15 September | 45% of total estimated tax |
| 3rd | 15 December | 75% of total estimated tax |
| 4th | 15 March | 100% of total estimated tax |
In the worked example above (total tax INR 4,53,024), the instalment schedule would be approximately:
| Date | Cumulative % | Instalment to pay |
|---|---|---|
| 15 June | 15% | INR 67,954 |
| 15 September | 45% | INR 1,36,607 (i.e. 30% more) |
| 15 December | 75% | INR 1,36,607 (i.e. 30% more) |
| 15 March | 100% | INR 1,13,256 (i.e. 25% more) |
Shortfall in advance tax is charged interest under Section 234B (3% per annum for the period of shortfall) and 234C (1% per month for each instalment shortfall). These charges compound quickly if estimates are significantly off.
Most founder-led companies use a practical approach: base the estimate on the prior year's actual tax for the first two instalments, then update the estimate as actual profits for the year become clearer.
ROC annual compliance: filings every company must make
Beyond tax, every Private Limited Company must comply with the Companies Act 2013 and file annual returns with the Registrar of Companies (ROC). These are separate from the income tax filings.
Annual General Meeting (AGM)
Every company must hold an AGM within six months of the end of its financial year. For a 31 March year-end (the standard Indian financial year), the AGM must be held by 30 September.
At the AGM, the directors present the audited financial statements, the board's report, and the auditor's report. Decisions on dividend, appointment of directors, and auditor reappointment are taken.
Key annual ROC filings
| Filing | Form | Due date | What it contains |
|---|---|---|---|
| Annual Return | MGT-7A (for small companies) or MGT-7 | 60 days from AGM | Details of shareholders, directors, changes during year |
| Financial Statements | AOC-4 | 30 days from AGM | Balance sheet, P&L, directors' report, auditor's report |
| Directors KYC | DIR-3 KYC | 30 September each year | Annual confirmation of each director's details |
For a 31 March year-end with an AGM by 30 September, this means the AOC-4 is due by 29 October and MGT-7A by 28 November.
Failure to file attracts a late fee of INR 100 per day per form, and the company can be marked as "default" in ROC records, which affects its creditworthiness and the ability of its directors to be appointed at other companies.
Statutory audit requirement
Every Private Limited Company must have its annual financial statements audited by a practising Chartered Accountant (CA). There is no turnover threshold below which audit is exempt for Private Limited Companies (unlike some other jurisdictions). The audit must be completed before the AGM.
This means a relationship with a CA firm is essentially mandatory, not optional, for a Private Limited Company in India.
Director remuneration: salary, sitting fees, and the rules
Director compensation in an Indian Private Limited Company is governed by the Companies Act 2013, and the rules are different from the freedom available in, say, a UK company.
Executive directors (whole-time directors and managing directors)
For a managing director (MD) or whole-time director (WTD), the Companies Act sets maximum remuneration limits:
- Where a company has adequate profits: maximum 5% of net profits per director, and 10% in aggregate for all whole-time directors
- Where profits are inadequate or there are losses: scheduled salary limits apply based on paid-up capital (for example, up to INR 60 lakh per year where paid-up capital is between INR 1 crore and INR 5 crore)
- Remuneration above the limits requires special resolution by shareholders and, in some cases, Central Government approval
For startups and early-stage companies with negative profits, this creates a practical tension: the founders may want to pay themselves a market salary, but the Companies Act limits what a loss-making company can pay its whole-time directors without additional approvals.
Salary is a deductible expense
Director salary paid to a whole-time director is treated as a company expense and reduces taxable profit, subject to it being reasonable and within the Act's limits. This is different from dividends, which are paid from post-tax profit.
Dividends from Private Limited Companies
Dividends declared by a Private Limited Company are:
- Paid from profits after corporate income tax
- Subject to dividend distribution tax in the shareholder's hands: taxed as income at the individual shareholder's applicable income tax slab rate (since the dividend distribution tax at company level was abolished in 2020)
- Subject to TDS at 10% where dividend paid to a resident individual exceeds INR 5,000 in the year
For a founder who is also the sole or majority shareholder, the choice between salary and dividend depends on the company's profit level, the founder's personal tax situation, and the practical constraints of the Companies Act on whole-time director remuneration.
ITR-6: the income tax return and its deadlines
The annual income tax return for a Private Limited Company is ITR-6. It must include the audited financial statements, the tax computation, and details of all TDS deducted and deposited during the year.
Filing deadlines
| Company type | Due date |
|---|---|
| Companies not subject to transfer pricing audit | 31 October of the assessment year |
| Companies with international or specified domestic transactions (transfer pricing audit required) | 30 November of the assessment year |
The Indian financial year runs from 1 April to 31 March. So for the financial year 2025-26 (1 April 2025 to 31 March 2026), the ITR-6 is due by 31 October 2026.
Filing after the due date attracts a late fee of INR 5,000 (reduced to INR 1,000 for companies with turnover up to INR 5 lakh), plus loss of the right to carry forward losses. Interest under Section 234A (1% per month on unpaid tax) also applies.
Transfer pricing for related-party transactions
If a Private Limited Company has transactions with related parties (for example, a subsidiary, a parent company, or a company where common directors or shareholders hold interest), transfer pricing rules may require the company to maintain documentation demonstrating that pricing is at arm's length. For companies with international related-party transactions, an independent accountant's transfer pricing certificate (Form 3CEB) must be obtained and filed, pushing the ITR-6 deadline to 30 November.
The full compliance calendar: a year at a glance
For a company with a standard 1 April to 31 March financial year:
| Month | Obligation |
|---|---|
| April | Advance tax payment for Q4 of prior year (15th if balance not paid by March); deposit TDS deducted in March by 30th |
| May | File Q4 TDS returns (31 May); file GSTR-1 for March (if monthly filer) |
| June | First advance tax instalment (15 June, 15% of estimated tax); monthly GSTR-3B |
| July | GSTR-1 for Q1 (if quarterly filer, by 31 July); monthly GSTR-3B |
| August | Monthly GSTR-3B |
| September | Second advance tax instalment (15 September, 45% cumulative); AGM must be held by 30 September; Directors KYC DIR-3 by 30 September |
| October | AOC-4 (financial statements) due 30 days after AGM; ITR-6 due 31 October (for non-TP cases) |
| November | MGT-7A annual return due 60 days after AGM; ITR-6 due 30 November (TP cases) |
| December | Third advance tax instalment (15 December, 75% cumulative); GSTR-9 annual return (31 December) |
| March | Fourth and final advance tax instalment (15 March, 100%); review tax position before year-end |
Every month also has GSTR-3B due on the 20th (for most companies) and TDS to deposit on the 7th.
Common compliance mistakes to avoid
Not registering for GST on time. Many companies exceed the INR 20 lakh threshold without registering, particularly in the early months after incorporation. Late registration means all sales made after crossing the threshold may retrospectively attract GST liability, penalties and interest.
Missing TDS deductions. A common oversight is not deducting TDS on professional fees paid to consultants or on rent. The vendor receives the full payment, but the company cannot claim the expense if TDS was not deducted, and it faces interest and penalty. This catches many early-stage companies.
Confusing advance tax with year-end tax. Advance tax is paid during the year based on estimated profit. Some founders wait until filing season to pay, which triggers Section 234B and 234C interest. For a company with substantial profits, this interest can amount to several lakh rupees.
Treating director salary as a flexible dividend. Paying a director more than the Companies Act allows without shareholder approval is a violation that can attract prosecution of directors, not just a financial penalty.
Missing the ROC filing deadlines. The INR 100 per day per form late filing penalty accumulates quickly. A company that misses AOC-4 and MGT-7A by three months has a penalty of approximately INR 18,000 per form before any additional penalties for non-compliance.
Skipping the statutory audit. No Private Limited Company is exempt from statutory audit. Operating for a full year without an appointed auditor (CA firm) is a Companies Act violation.
How AccountsOS handles Indian Private Limited Company accounting
AccountsOS is live in India and supports the full compliance workflow for Private Limited Companies on the Indian accounting platform:
- Tracks GST collected and input tax credits (ITC), maintaining the running credit balance across GSTR-3B filings
- Manages TDS deductions: flags qualifying payments, calculates the withholding amount, and tracks deposit deadlines
- Advance tax estimation: updates the projected full-year tax as transactions are recorded, so you can see what each quarterly instalment should be
- Maintains the audit trail required by statutory auditors, including categorised transactions with supporting documents
- Tracks ROC filing deadlines (AOC-4, MGT-7A, DIR-3 KYC) in the deadline calendar alongside tax deadlines
- Finn, the AI CFO, answers questions about Indian corporate income tax and GST obligations in plain English, with citations to CBDT and GSTN official sources
Try AccountsOS free — 14-day trial, no card required.
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