What Is Corporate Tax?
Corporate tax is a tax on the profits that businesses earn. Every company operating in India, including Kerala, needs to pay taxes based on the Income Tax Act, 1961.
Corporate Tax Rates in India (Applicable to Kerala)
As Kerala follows India’s national tax structure, the corporate tax rates are the same throughout the country.
- Domestic Companies
- 25%: For companies with annual turnover up to INR 400 crore.
- 30%: For companies with annual turnover above INR 400 crore.
- New Manufacturing Companies (registered after Oct 1, 2019)
- 15%: If they do not claim other tax exemptions or incentives.
- Foreign Companies
- 40%: On profits earned within India.
Note: In addition to the basic rate, companies must also pay a surcharge and cess (health and education cess at 4%).
Goods and Services Tax (GST) in Kerala
- Kerala also follows India’s GST system, which applies to the sale of goods and services.
- GST rates can vary (0%, 5%, 12%, 18%, or 28%) depending on the product or service.
- Businesses earning more than INR 40 lakh annually (or 20 lakh for services) must register for GST.
State-Specific Taxes in Kerala
Kerala levies some local taxes in addition to GST:
- Kerala Flood Cess: Introduced after the 2018 floods, this is 1% on certain goods and services within Kerala.
- Professional Tax: Companies must deduct professional tax from employees’ salaries and remit it to the state government.
How to Comply with Corporate Taxes in Kerala
To ensure smooth tax compliance, businesses need to:
- Register with the Income Tax Department: Get a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN).
- File Annual Tax Returns: Submit your income tax return by the due date (typically October 31 for companies).
- Pay Advance Tax: If your estimated tax liability exceeds INR 10,000, you must pay taxes in advance in quarterly installments.
- Maintain Proper Records: Keep track of your financial transactions to avoid penalties during audits.
Tax Incentives for Businesses in Kerala
Kerala offers some tax incentives and subsidies to promote business activities:
- Startup Support: Businesses under the Kerala Startup Mission can enjoy tax holidays and access to funding schemes.
- Investment Subsidies: The government offers capital investment subsidies for sectors like IT, tourism, and renewable energy.
Managing Corporate Taxes: Tips for Businesses
- Hire a Tax Consultant: A professional can help you manage compliance and reduce tax liabilities.
- Use Accounting Software: Tools like Tally or Zoho Books make tracking income and expenses easier.
- Take Advantage of Deductions: Claim business expenses such as rent, utilities, and employee salaries to reduce taxable income.
- Plan Taxes in Advance: Estimate your tax liability early to avoid last-minute hassles.
Conclusion
Understanding and managing corporate taxes in Kerala is essential for running a successful business. With the right planning and professional support, companies can comply with tax laws while also benefiting from available incentives. Whether you’re starting a new venture or running an established business, staying on top of taxes ensures smooth operations and long-term growth.
