Private Limited Taxation

Income tax on Private Limited Company is flat @30% on the Net Total Income. Additionally, there are further Taxes like MAT(Minimum Alternative Tax), DDT (Dividend Distribution Tax) which also has to be paid by a private limited company

Overview

As per the Companies Act 2013, Every Private Limited Company is an artificial person who enjoys all the rights of an individual. It has its separate PAN number, Bank Account, etc.

Moving forward with the provisions, Private Limited Company has to pay Dividend Distribution Tax on the Dividend which will be distributed to all the shareholders.

As per Income Tax Act 1961, Every Company or body corporate has to pay tax on a flat rate 30% on the Net Total Income.

Every Private Limited Company is covered by many tax laws. Which depends upon their operations. For Example, Sales Tax (VAT & CST), Service Tax, Excise Duty, etc. 

Tax Rates

• Income Tax rate for a Private Limited Company is 30%.
• When the turnover of the company exceeds 1 crore, there is a surcharge of 5% which will levy on the Net Total Income of the company.
• Cess is also applicable, 2% education cess and 1% secondary higher education cess i.e. 3% effective rate of cess.
• Swach Bharat Cess is also levy on the Net Total Income and MAT also.
• Any further source of income shall be calculated as Income under head Other sources. Capital Gains shall be computed under head Capital Gains.

Deductions and Gains

• MAT is applicable on a Private Limited Company. Every company has to pay a minimum amount of tax if income tax is Nil.
• Dividend Distribution Tax also has to be paid on the Dividend payable.
• The company can deduct all the company expenses from the Total income. For e.g. Directors Salaries, Purchase of Assets, Stationary, etc.
• The company also can avail the deduction under section 80G for making any donation.
• The company also avail deduction for doing CSR (Corporate Social Responsibility).
• There are also many deductions, provided to company under head PGBP (Profits and Gains of Business and Professions).
• Presumptive Taxation scheme under section 44AD and 44AE of Income Tax Act 1961 applies to companies also. It is optional to them.