Corporate Tax vs. Individual Tax: Key Differences

Introduction

Taxation is an essential aspect of financial management for both businesses and individuals. Understanding the differences between corporate tax and individual tax is crucial for effective tax planning and compliance. While both are levied by the government, they vary significantly in terms of tax rates, exemptions, deductions, and filing requirements.

This guide will break down the key differences between corporate tax and individual tax, highlighting how accounting services can help taxpayers navigate complex tax laws efficiently.

What is Corporate Tax?

Corporate tax is the tax levied on the net income or profits of a business entity. Companies, both domestic and foreign, operating within a country are required to pay corporate tax as per the prevailing tax laws.

Corporate Tax Features:

• Applied to business entities such as private limited companies, public limited companies, LLPs, and foreign corporations.
• The tax rate is typically fixed and structured in slabs based on turnover or profit margins.
• Corporations can claim deductions for business expenses, depreciation, and investment incentives.
• Companies must file annual tax returns and comply with regulations set by the tax authorities.

Corporate Tax Rates in India (2025)

The corporate tax rates in India are:

• Domestic Companies: 22% (excluding surcharge and cess) under the new regime.
• New Manufacturing Companies: 15% (for those incorporated after October 1, 2019).
• Foreign Companies: 40% (subject to applicable treaties).

What is Individual Tax?

Individual tax, also known as income tax, is levied on the earnings of individuals, including salaried employees, freelancers, and self-employed professionals. The tax is calculated based on an individual’s total income, with different tax slabs applicable to different income groups.

Individual Tax Features:

• Applied to salaried employees, freelancers, and business owners.
• Progressive tax system, meaning higher income attracts higher tax rates.
• Various deductions available under Sections 80C, 80D, and 10(14) for investments, insurance, and allowances.
• Individuals must file Income Tax Returns (ITR) annually, typically by July 31st of the assessment year.

Individual Tax Slabs (2025 – New Regime)

• Income up to ₹2.5 lakh – No tax
• ₹2.5 lakh – ₹5 lakh – 5%
• ₹5 lakh – ₹7.5 lakh – 10%
• ₹7.5 lakh – ₹10 lakh – 15%
• ₹10 lakh – ₹12.5 lakh – 20%
• ₹12.5 lakh – ₹15 lakh – 25%
• Above ₹15 lakh – 30%

Note: Individuals can opt for the old regime if they prefer exemptions and deductions.

Key Differences Between Corporate Tax and Individual Tax

Importance of Accounting Services for Tax Compliance

Handling taxation, whether corporate or individual, requires careful planning and compliance with legal requirements. This is where accounting services play a crucial role.

How Accounting Services Help Businesses with Corporate Tax?

1. Tax Planning & Optimization – Helps reduce tax liabilities through strategic deductions.
2. Compliance & Filing – Ensures accurate tax return submissions, avoiding penalties.
3. Audit Support – Provides necessary documentation and representation during tax audits.
4. Expense Management – Tracks business expenses to claim maximum deductions.

How Accounting Services Help Individuals with Taxation?

1. Income Tax Filing Assistance – Helps individuals file their ITR accurately and on time.
2. Deductions & Exemptions Guidance – Advises on investment options to reduce tax burdens.
3. TDS Reconciliation – Ensures TDS claimed in Form 26AS matches income tax returns.
4. Financial Planning – Guides investment in tax-saving instruments like ELSS, PPF, and insurance policies.

FAQs 

Q1: Can an individual pay corporate tax?

No, corporate tax is only applicable to registered business entities. However, individuals running sole proprietorships are taxed under personal income tax.

Q2: Are tax rates for corporate tax and individual tax the same?

No, corporate tax rates are fixed or based on turnover, while individual tax follows a progressive structure.

Q3: Can a freelancer be taxed under corporate tax?

No, freelancers are taxed as individuals. However, if they register a company or LLP, corporate tax rules will apply.

Q4: What happens if a company does not pay corporate tax on time?

Companies may face penalties, interest charges, and legal action for failing to comply with tax regulations.

Q5: Can accounting services help reduce tax liabilities?

Yes, professional accounting services help optimize tax planning, identify deductions, and ensure compliance, ultimately reducing tax liabilities.

Conclusion

Corporate tax and individual tax are fundamental components of the taxation system, each with distinct structures and regulations. Businesses must comply with corporate tax rules, while individuals are subject to progressive income tax rates.

To simplify tax compliance, individuals and companies should leverage accounting services for tax planning, accurate filing, and maximizing deductions. Understanding the differences between corporate and individual tax ensures better financial management and legal compliance, helping taxpayers minimize tax burdens efficiently.