Corporate tax incentives for eligible companies 

India’s corporate tax incentives offer new companies an income tax rate of 22 percent, while new domestic manufacturing firms benefit from a lower rate of 15 percent. Domestic enterprises can avail themselves of this 22 percent rate only if they do not utilize additional tax incentives or deductions. The effective tax rate for these companies, including surcharge and cess, is approximately 25.17 percent

Companies choosing the corporate tax rate are exempt from paying alternate tax. Indias current effective tax rates position it competitively against Asian investment destinations and manufacturing centers, like China, Vietnam, Malaysia, Singapore and South Korea. 

TABLE

Tax rates for foreign companies 

Foreign companies are required to pay income tax at a rate of 40 percent, on their income.  

Tax rate for partnership firms, including LLP or local authorities 

Partnership firms, including LLPs and local authorities have an income tax obligation set at 30 percent of their income. 

Tax incentive for capital expenditure on specified businesses 

Businesses, in industries are allowed to deduct capital expenses in the year they start commercial operations. These industries include managing chain facilities for warehousing establishing and operating storage facilities for produce developing and running container depots or freight stations as well as creating and managing warehouses, for storing sugar, beekeeping, honey and beeswax production. 

Incentives for Special Economic Zones (SEZs) 

Special Economic Zones (SEZs) offer a range of advantages to investors facilitating investment, in India. These perks include; 

1. Tax Benefits: SEZ developers and units qualify for tax breaks on their profits and investments for a specified period, based on the type of SEZ and approval date. Developers receive an income tax exemption on profits for the five years followed by a 50% exemption for the next five years. Similarly SEZ units enjoy an income tax exemption on profits during the five years a 50% exemption for the following five years and a 50% exemption on reinvested profits for an additional five years.

2. Customs Duty Waiver: SEZ units can import goods duty free for their authorized operations and source goods from the Domestic Tariff Area without paying any duty.

3. Simplified Processes: SEZ units benefit from procedures for approvals, registrations and certifications through a one stop clearance system tailored to address all their needs.

4. Infrastructure Assistance: SEZ developers are able to construct and manage infrastructure like roads, power supply, water facilities and communication networks within the zone with assistance. This ensures that SEZ units have access to top notch infrastructure, within the zone.

5. Job Flexibility: Special Economic Zone (SEZ) units are able to hire employees from both international backgrounds without any limitations. They have the flexibility to provide salary packages. Currently enjoy the advantage of lenient regulations permitting remote work, for all SEZ staff until December 31 2023.

Tax incentives in different Indian states 

When foreign corporations are determining the location to set up their operations in India it’s crucial to understand that each state provides policies and incentives. The qualification, for these benefits typically hinges on aspects; 

• The geographic position of the state; 
• The nature of goods to be produced; 
• The scale of the investment; and 
• The potential impact, on employment opportunities. 

Social security agreements 

India has put in place Social Security Agreements (SSAs) to simplify social security responsibilities for workers. These agreements offer advantages, like exemption, transferability of pensions combining benefits and the option to withdraw security benefits. 

By the year 2023 India has finalized SSAs with 20 nations, including Belgium, Germany, Switzerland, Denmark, Norway, Luxembourg, France, South Korea, the Netherlands and Hungary. 

These SSAs provide three perks for workers and NRIs; 

1. Exemption; Workers can skip paying social security contributions in the host country for a period (as outlined in each SSA) if they continue contributing to their home countrys social security system. To benefit from this provision the worker must present a ‘Certificate of Coverage’ (CoC) from their home countrys social security authorities to the host countrys authorities.

2. Transferability; Workers can receive social security benefits in either their home or host country without any change in benefit amount. This allows benefits to be moved from the host nation back to the home nation or to recipients upon retirement or cessation of employment.

3. Combining Benefits; This feature takes into account all periods of an employees work across countries when determining eligibility, for benefits.

The amount of benefits is modified in relation, to the duration of work, in the nation. 

Incentive applicable for FY 2024  

1. In order to support the development of businesses there will be a reduced tax rate of 15% available, until March 31 2024.

2. Several measures have been introduced to enhance manufacturing in India, such as the Manufacture and Other Operations in Customs Warehouse (MOOWR). Production Linked Incentives (PLIs) across sectors. Moreover the government has launched the Remission of Duties and Taxes on Exported Products (RoDTEP) program to bolster exports.

3. New customs duty reforms have been put in place to encourage manufacturers.

4. A proposal has been made to extend the deadline for startups to benefit from tax holidays by one year from March 31 2023 to March 31 2024.

5. The implementation of faceless customs processes has been finalized, aiming to streamline and simplify business operations.

6. Micro, Small and Medium Enterprises (MSMEs) may receive tax benefits for one to three years after achieving significant growth, in investment or turnover that moves them into a higher category.

7. As of April 1 2023 new manufacturing co operative societies meeting requirements will qualify for a tax rate of 15% (plus surcharge and cess).

8. Indian startups can now. Apply losses incurred during the decade of business regardless of any alterations, in ownership as long as the original shareholders maintain their investments throughout this timeframe. The government has suggested extending the limit of seven years to ten years.