Corporate Tax vs Personal Income Tax
Corporate Tax vs Personal Income Tax — how businesses and individuals are taxed differently
Overview
India taxes companies (corporations) and individuals under different structures. Companies pay a flat corporate tax rate; individuals pay progressive slab rates. Understanding both helps business owners optimize whether to operate as a company or as a sole proprietor/LLP.
Head-to-Head Comparison
| Factor | Corporate Tax | Personal Income Tax | Winner |
|---|---|---|---|
| Applicable To | Companies (Pvt Ltd, Public Ltd, OPC) | Individuals, HUF, sole proprietors, partners | Tie |
| Tax Rate Corporate rate lower for profits > ₹10L | 22% (new regime domestic companies) | 0–30% (slab rates) | A wins |
| Surcharge | 7% (income 1–10Cr) / 12% (>10Cr) | 10–37% (based on income) | A wins |
| Minimum Alternate Tax (MAT) | 15% of book profits if regular tax is lower | Not applicable | B wins |
| Dividend Tax | Dividend taxed in shareholder's hands | Dividend received is income | Tie |
| Basic Exemption | No exemption — all income taxed | ₹2.5L (old) / ₹3L (new) exempt | B wins |
Data updated for FY 2025–26. Regulations may change — consult a professional before deciding.
Which Should You Choose?
Choose Corporate Tax if…
Corporate tax at 22–25% may be lower than personal slab rates for high earners. Running a Private Limited Company can reduce tax burden for profits above ₹10–15 lakh.
Get Corporate TaxChoose Personal Income Tax if…
Personal tax (slab rates) may be lower for income up to ₹7 lakh (new regime) due to rebate. For small businesses, personal tax filing is simpler.
Still not sure which to choose?
Our experts analyze your business situation and recommend the best structure — free consultation.
Talk to an Expert — FreeFrequently Asked Questions
Common questions about Corporate Tax vs Personal Income Tax
For profits above ₹10–15 lakh, corporate tax at 22% (effective ~25.17% with surcharge) is typically lower than personal income tax at 30% (effective ~34.5% with surcharge for high earners). However, you must factor in dividend tax when taking money out of the company.
Related Comparisons
Old vs New Income Tax Regime — which saves you more tax?
ITR-1 vs ITR-2 — which income tax return form do you need?
Compare LLP vs Private Limited Company on compliance, tax, and fundraising
Private Limited vs Sole Proprietorship — corporate protection vs simplicity