India: Entorn econòmic
A GST compensation cess applies on some demerit and luxury items, including automobiles and tobacco products.
Stamp duties and real estate taxes are imposed by municipal authorities and vary across states. A separate securities transaction tax (varying between 0.001% and 0.125%) continues to apply. Some demerit and luxury items are subject to a compensation cess (rates vary).
Vehicle taxes are charged in various States.
An equalization levy of 6% on the amount of consideration in excess of INR 100,000 for specified services received by a non-resident without a permanent establishment in India must be withheld by a resident payer or a non-resident payer with a PE in India.
A 100% deduction is available for capital and revenue expenditures (excluding land or buildings) on in-house scientific research conducted by companies in specified industries, such as biotechnology or manufacturing eligible goods, and for payments made to specified organizations for scientific research. This includes amounts paid to companies registered in India conducting scientific research, research associations, universities, colleges, or other institutions engaged in social science or statistical research.
An investment-linked incentive allows a 100% deduction for capital expenditures, excluding land, goodwill, or financial instruments, for specified activities. This incentive also applies to the development, maintenance, and operation of infrastructure facilities like roads, highway projects, water-supply projects, or ports, subject to certain conditions.
A 100% deduction is available for capital and revenue expenditures on "notified" agricultural extension or skill development projects. For the right to use spectrum for telecommunication services, certain capital expenditures can be deducted over the period of the right.
Units in the IFSC in GIFT City can claim a 100% deduction of income for 10 out of 15 assessment years and are subject to a concessional MAT rate of 9%. Eligible start-ups can elect a 100% deduction of profits from an eligible business for any three consecutive assessment years out of the 10 years starting from the year of incorporation (for companies/LLPs established on or after 1 April 2016 and before 1 April 2024).
A concessionary tax rate of 10% (plus surcharge and cess) on income by way of royalty in respect of a patent developed and registered in India by a resident in India ("Patent Box regime").
A securities transaction tax is applicable to transactions involving the purchase/sale of equity shares, derivatives, units of equity-oriented funds through a recognised stock exchange, or the purchase/sale of a unit of an equity-oriented fund to any mutual fund. The rates vary from 0.001% to 0.125%, depending upon the type of securities.
A property tax is levied by the governing authority of the jurisdiction in which the property is located, with rates varying from city to city. Stamp duties apply to all legal property transactions, with different rates being set by each state.
Social contributions paid by the employer amount to 12% of the employee's salary (8.33% are allocated to the Employees’ Pension Fund, capped at INR 15,000/month for Indian employees). A reduced tax rate can apply to individual and Hindu Undivided Family (HUF) taxpayers.
An equalization levy of 6% must be withheld by a resident payer or a nonresident payer with a PE in India on consideration exceeding INR 100,000 for specified services received by a nonresident without a PE in India, such as online advertising or digital advertising space. Additionally, a 2% equalization levy applies to e-commerce supply and services provided by an e-commerce operator without a PE in India, if their annual sales, turnover, or gross receipts are at least INR 20 million. Income subject to the 6% levy is not taxed in the recipient's hands, and income from e-commerce supply or services subject to the 2% levy is exempt from income tax. A 1% withholding tax applies to the sale of goods or provision of services by an e-commerce operator to an e-commerce participant resident in India.
The Finance Act, 2022 taxes gains from VDAs, including cryptocurrencies and NFTs, at 30% without allowing expense deductions other than the cost of acquisition. Losses from VDA transfers cannot be set off against other income. From July 1, 2022, a 1% TDS applies to payments to residents on VDA transfers.
Partnership firms and LLPs are taxed separately, with partners' income shares being tax-exempt. They face a tax rate of 31.2% (inclusive of surcharge and health and education cess) for income below INR 10 million and 34.944% for income exceeding INR 10 million, along with an alternate minimum tax of 18.5%. Interest payments to partners on capital or current accounts are tax-deductible, capped at 12% per annum. Working partners can receive salary, bonus, commission, or remuneration, with deductions based on the firm's book profit at different profit levels.
Indian companies must pay an additional tax on share buybacks from shareholders at 20% (plus a 12% surcharge and 4% health and education cess) on the difference between the buyback consideration and the issue price of the shares. The CBDT has outlined the methodology for determining the issue price under 12 different situations. The buyback consideration received by shareholders is tax-exempt, and no tax credit is allowed for these taxes to either the company or the shareholders.
| India | South Asia | United States | Germany | |
| Number of Payments of Taxes per Year | 10.9 | 26.7 | 10.6 | 9.0 |
| Time Taken For Administrative Formalities (Hours) | 251.9 | 273.5 | 175.0 | 218.0 |
| Total Share of Taxes (% of Profit) | 49.7 | 43.9 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
| New Personal Tax Regime (NPTR) - has been made the default tax regime effective 1 April 2023 The taxpayer renounces to certain deductions or exemptions (consult the "Deduction" section) |
If an individual is a resident and their total income does not surpass INR 500,000, they qualify for a tax rebate of the lesser amount between their income tax or INR 12,500. However, if they choose to use the new tax regime, the tax rebate is the lesser amount between their income tax or INR 25,000, as long as their total income remains under INR 500,000. |
| Less than INR 300,000 | 0% |
| INR 300,001 – 600,000 | 5% |
| INR 600,001 – 900,000 | 10% |
| INR 900,001 – 1,200,000 | 15% |
| INR 1,200,001 – 1,500,000 | 25% |
| Above INR 1,500,000 | 30% |
| Surcharge | In addition to the income-tax, a surcharge (SC) of 10% is to be levied where the total income of individuals is between INR 5 to 10 million; 15% where the total income of individuals is between INR 10 and 20 million; 25% between INR 20 and 50 million; 25% above 50 million (37% in case the taxpayer opts for the old tax regime). On income arising on account of long-term capital gains, the rate of surcharge would be capped at 15%. |
| Health and education cess | 4% of the income tax and surcharge |
| Tax rebate | Resident individuals qualify for a tax rebate, which is the lower of the income tax or INR 12,500 if the total income does not surpass INR 500,000. However, if the alternate tax regime is opted for, the rebate would be the lower of the income tax or INR 25,000 for total incomes below INR 500,000. |
| Old Personal Tax Regime (NPTR) | If an individual is a resident and their total income does not surpass INR 500,000, they qualify for a tax rebate of the lesser amount between their income tax or INR 12,500. However, if they choose to use the new tax regime, the tax rebate is the lesser amount between their income tax or INR 25,000, as long as their total income remains under INR 500,000. |
| Less than INR 250,000 | 0% |
| INR 250,000 – 300,000 | 5% (nil for resident senior citizens above 60 years old) |
| INR 300,000 – 500,000 | 5% (nil for resident senior citizens above 80 years old) |
| INR 500,000 - 1,000,000 | 20% |
| Above INR 1,000,000 | 30% |
| Alternative minimum tax (AMT) Applicable to business or profession income |
18.5% (plus surcharge and health and education cess) on the adjusted total income. |
Interest or taxes paid to tax authorities are not deductible. However, deductions up to certain limits are permitted for contributions to approved charities and, to a limited extent, for children's education or hostel expenses received from the employer. Additionally, a deduction of up to INR 150,000 is available for investments made in eligible schemes in India during the tax year, including life insurance premiums, contributions to recognized provident funds, public provident funds, or National Pension System, tuition fees, and repayment of housing loans. An extra deduction of INR 50,000 is granted for contributions to a government-notified pension scheme. Employers' contributions to the NPS are eligible for an additional deduction of up to 10% of salary (14% for contributions made by the Central Government). Upon retirement, individuals can withdraw up to 60% of the corpus fund tax-free, with the remaining 40% required to be invested in an annuity plan. Withdrawals up to 60% of the corpus fund are tax-exempt for all subscribers, and if received by a nominee due to death, they remain tax-free. Partial withdrawals from the NPS by employees see 25% of their contribution exempt from tax in the year of withdrawal.
On donation of a certain amount to specifically approved funds, charitable institutions, etc., an individual can claim a deduction of 50% to 100% of the amount donated, subject to certain legal restrictions. Deduction for funds or charitable institutions in excess of INR 2,000 can to be allowed only when the donation is not made in cash.
The medical expenditure incurred for senior citizens (60 years and above) will be deductible up to INR 50,000 if no payment has been made towards any existing health insurance policy for such individuals.
Expenses relating to business income are deductible.
Following the introduction of the new optional personal tax regime, individuals who opt for such regime renounce to certain deductions or exemptions, including house rent allowance; leave travel allowance; allowance under section 10(14) of the Income-tax Act (with some exceptions); standard deduction of INR 50,000 and deduction for professional tax; exemption of free food and beverages through vouchers provided by the employer; deduction of interest payment on housing loans for self-occupied property and restrictions on set-off of loss from let out property; relocation allowance; helper allowance; children education allowance; all Chapter VIA deductions of the Income-tax Act available for expenditure by way of employee’s contribution to provident fund, insurance premium, donations, medical premium, etc., except employer’s contribution to a notified pension scheme, such as National Pension Scheme (NPS). For further information, click here.
All employees, including international workers but excluding those defined as "excluded employees" under the Provident Fund Act, contribute 12% of eligible wages monthly to the provident fund. However, under a social security agreement (SSA) with a foreign jurisdiction, inbound international workers meeting certain conditions are exempt from contributing to the provident fund in India upon obtaining a certificate of coverage (CoC). An international worker can be either: (i) a foreign employee working for an establishment in India covered by the Provident Fund Act, or (ii) an Indian employee seconded to a jurisdiction with which India has an SSA, who has not obtained a CoC and is or will be eligible for benefits under the social security program of the host jurisdiction.
Dividend income to a non-resident received on or after 1 April 2020 would be subject to tax in the hands of the shareholder at the rate of 20% unless a lower rate applies due to a tax treaty.
Interest: Interest payments to Indian residents generally incur a 10% withholding tax, including those from listed debentures. For nonresidents, interest on foreign currency borrowings faces a 20% withholding tax (plus surcharge and cess), while interest on convertible bonds is taxed at 10% (plus surcharge and cess) until the conversion option is exercised. These rates may be reduced under tax treaties. Additionally, a 5% withholding tax (plus surcharge and cess) applies to specific interest types for nonresidents, such as borrowings made before July 1, 2023, or investments by foreign investors in rupee-denominated bonds. In cases where a treaty applies but the nonresident lacks a PAN, tax is withheld at the higher of the treaty rate or 20%, unless the required documents are provided. If certain conditions aren't met for concessional rates, a 30% withholding tax (or 40% for foreign companies) applies, with potential treaty-based reductions.
Royalties: Royalties paid to Indian residents typically face a 2% withholding tax, except when related to cinematographic films, where the rate is 10%. Nonresident royalties incur a 20% withholding tax (plus surcharge and cess), raised from 10% since April 1, 2023, but this may be reduced under tax treaties. If a treaty applies but the nonresident lacks a PAN, tax is withheld at the higher of the treaty rate or 20%, unless the required documents are provided.
The rates may be reduced under a tax treaty.
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Actualitzacions: March 2025
