Income tax rate for Section 8 Company

Income Tax Rate for Section 8 Company

Section 8 Companies are being treated like any other company if such company does not availing exemption u/s 12 of income tax act. Generally, section 8 companies’ avails exemption under income tax act and its income become exempt from levy of income tax. It means generally income tax rate for section 8 company is Nil.

Under income tax act there is no separate rate is defined for section 8 company which is clearly indicates that tax rate for section 8 companies may very from range of 15% to 30%. In general companies are liable to tax at 30% and such company may be One Person Company or Section 8 Company.

As per section 12AA of Income Tax Act, if an organisation has valid certificate u/s 12A of income tax act then such organisation’s income will become exempt from income tax. A section 8 company can also apply for exemption u/s 12A. And its income will also become exempt till the time of validity of certificate. If section 8 companies are not claiming exemption the following income tax rate may apply on section 8 companies:

Effective Income Tax Rate Chart for Section 8 Companies for financial year 2020-21:

ParticularRate of Income tax for companies
Section 8 Companies not availing benefit u/s 115BAA/115BAB30% if turnover is more than INR 400 Crore

25% if turnover does not exceed INR 400 Crore

Section 8 Companies availing benefit u/s 115BAA22%
Section 8 Companies availing benefit u/s 115BAB15%

Generally section 8 company engages in social welfare activities and does not manufacture anything hence benefit of lower rate of 15% may not be available for section 8 Company.

Conclusion:

On the basis of above analysis we can conclude that Income tax rate on section 8 company shall be NIL if section 8 company availing exemption under income tax act. Further income tax rate as per above mentioned prescribed chart can be applicable to section 8 company if exemption are not being availed.

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