Question

A company which is not a domestic company will pay income tax at the rate of :-

• A. 25%
• B. 30%
• C. 40%
• D. 20%

Hint:

As a general rule in Indian income tax, foreign companies are taxed at a higher flat rate than domestic companies. For a long time, this rate has been 40% (plus surcharge and cess).

Answer 1

The Correct Option is C

Under the Income Tax Act, 1961, a company that is not a domestic company is classified as a "foreign company." The tax rates for companies are specified in the Finance Act of the relevant year. For the assessment year corresponding to the 2019 exam (AY 2019-20), the tax rate applicable to foreign companies was 40% on their total income, plus applicable surcharge and cess. This is significantly higher than the rates applicable to most domestic companies (which were generally 25% or 30%).