Question

The taxes on the profits of companies and corporates having businesses in India are called as corporate tax. Even foreign companies are charged tax on the income they earn in India.

The corporate tax rates for these companies are as follows:

Turnover	Indian companies	Foreign companies
Less than ₹50 crore	25%	40%
More than ₹50 crore	30%	40%

Identify the taxation system followed for the corporate tax.

• A. Progressive taxation system for Indian companies
• B. Progressive taxation system for foreign companies
• C. Proportional taxation system for Indian companies
• D. Proportional taxation system for foreign companies

Answer 1

Answer: (A), (D)

Proportional taxation system for foreign companies

In the progressive taxation system, the tax rate increases as the income increases. For Indian companies, the corporate tax rates increase as turnover increases. Hence, the progressive taxation system is followed.

Under the proportional taxation system, everyone pays a fixed percentage of their income as tax. For foreign companies, the corporate tax rate is the same, irrespective of the turnover. Hence, the proportional taxation system is followed.