Corporate Income Tax in India: Rates, Compliance and Planning for GCCs
Headline rates, the 22 percent concessional regime, Minimum Alternate Tax and what a Global Capability Centre actually pays.
A wholly owned Indian subsidiary of a foreign parent is taxed as a domestic company. The effective rate depends on whether the company opts into the 22 percent concessional regime (section 115BAA of the Income Tax Act, 1961) or stays on the historic 30 percent regime with deductions.
Headline rates
Domestic companies have two options.
- Section 115BAA, 22 percent (effective 25.17 percent with surcharge and cess). No exemptions or accelerated depreciation allowed.
- Default regime, 30 percent (effective 34.94 percent with surcharge and cess). Most deductions and Special Economic Zone benefits available.
- New manufacturing companies under section 115BAB, 15 percent (effective 17.16 percent), conditions apply.
Minimum Alternate Tax (MAT)
MAT applies at 15 percent of book profits where regular tax is lower. Companies that opt into section 115BAA are exempt from MAT, which is a key reason most new GCCs choose that regime.
Dividend distribution
Dividend Distribution Tax was abolished in 2020. Dividends are now taxed in the hands of the recipient. Outbound dividends to a foreign parent attract Tax Deducted at Source at 20 percent (plus surcharge), often reduced to 5 to 15 percent under the relevant Double Taxation Avoidance Agreement (DTAA).
Transfer pricing
Captive GCCs servicing only the parent are typically remunerated on a cost plus markup. The Safe Harbour Rules prescribe markups of 17 to 25 percent depending on function. Documentation is mandatory above thresholds. See the Transfer Pricing Safe Harbour brief for detail.
Compliance calendar
Advance tax in 4 instalments (15 June, 15 September, 15 December, 15 March). Annual return by 31 October (audit cases). Transfer pricing report by 31 October. Country by Country Reporting where the group consolidated turnover exceeds INR 6,400 crore.
Frequently asked questions
Most foreign owned GCCs incorporated after 2019 opt for section 115BAA at 22 percent (25.17 percent effective). It is simpler, MAT does not apply, and the loss of accelerated depreciation rarely matters for a services captive.
A foreign company operating through a branch (Project Office or Liaison Office route) is taxed at 35 percent (38.22 percent effective) on its India profits, far higher than a subsidiary. Branches are not recommended for a multi year GCC.
More from the hub
Why a GCC is treated as an exporter, how to claim refunds and the Letter of Undertaking mechanism.
How a captive GCC is remunerated by its foreign parent, with the bare minimum compliance burden.
Inbound capital, External Commercial Borrowings, foreign currency accounts and dividend repatriation under the Foreign Exchange Management Act.
The step by step path from name reservation to operational entity, in 30 to 45 working days.
Provident Fund, Gratuity, the four Labour Codes and the real fully loaded cost of an India hire.
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