Indiana has a structured taxation system that applies differently to corporations and pass-through entities. Corporations pay a flat corporate income tax, while partnerships, LLCs, LLPs, and S corporations pass their income through to owners who pay personal tax at the individual level. The state also imposes penalties and interest for non-compliance, alongside estimated payment requirements to ensure timely contributions.
This blog provides a complete view of Indiana’s tax system, covering corporate income tax rules, pass-through entity taxation, estimated payments, and the penalties that apply for delays or underpayment.
Corporate Income Tax
Corporations conducting business in Indiana are required to pay corporate income tax at a flat rate of 4.9% on taxable income. Two different corporate income tax returns are used in Indiana:
- IT-20 for C corporations
- IT-20S for S corporations
The due date for filing both returns is May 15.
Indiana accepts federal extensions of time for filing. If a corporation has already filed a Form 7004 or used the federal electronic extension, there is no need to separately notify the Indiana Department of Revenue (DOR). Timely filing is recognized for returns postmarked within one month after the date indicated on the federal extension.
If a corporation does not need a federal extension but still requires more time for its state filing, an extension can be requested through INTIME, the state’s e-services portal. Businesses must prepay at least 90% of their tax liability with the request. Alternatively, corporations can submit a written request before the filing deadline.
Interest and Penalty
Indiana enforces strict penalties for late compliance:
- Late Filing Penalty: USD 10 per day, up to a maximum of USD 250.
- Late Payment Penalty: Greater of USD 5 or 10% of the unpaid balance.
- Interest Rate: Calculated at 2%, based on the adjusted prime rate published by the U.S. Treasury. Interest accrues from the original due date until payment is made in full.
These measures highlight the importance of timely and accurate filing.
C corporations in Indiana may also need to make estimated tax payments if they expect to owe more than USD 2,500 for the year.
Estimated payments are due in four installments on the 20th day of the fourth, sixth, ninth, and twelfth months of the tax year. Form IT-6 is used to calculate and make these payments.
By requiring advance payments, Indiana ensures steady tax revenue while preventing large year-end liabilities for corporations.
Pass through entity Tax
Indiana treats S corporations, partnerships, LLCs, and LLPs as pass-through entities. These businesses do not pay state income tax at the entity level. Instead, their income, deductions, and credits pass directly to shareholders, partners, or members, who report them on their personal returns.
The applicable individual income tax rate is 3.23%.
Filing Requirements
- Indiana residents who are shareholders of an S corporation or members of a partnership/LLC/LLP must include their share of income on their Form IT-40.
- Part-year and full-year nonresidents must file Form IT-40PNR if they have income from Indiana sources or are otherwise required to file a federal return.
Due Date
The standard filing deadline is April 18 of the following year. For fiscal year filers, the deadline is the 15th day of the fourth month after the fiscal year closes. If the due date falls on a weekend or holiday, the deadline is extended to the next business day.
Extension to file
Indiana allows individuals to request a six-month extension to file, extending the deadline to November 15. Form IT-9 is used to request this extension.
Estimated Tax Payment
Shareholders or partners may need to make estimated tax payments if they expect to owe more than USD 1,000 for the tax year. Payments are due in four installments, on:
- April 18
- June 15
- September 15
- January 16 of the following year
Form ES-40 is used for calculating estimated tax payments.
Penalty and Interest
- Late Filing Penalty: Greater of 10% of the tax due or USD 5.
- Interest: Charged at 2%, even if an extension has been granted, provided tax is due after April 18.
Indiana’s taxation system clearly distinguishes between corporations and pass-through entities. Corporations face a flat 4.9% tax and must comply with strict estimated payment requirements, while pass-through entities shift the tax burden to individuals at a 3.23% rate.
Extensions provide flexibility, but penalties and interest charges ensure compliance. For businesses, staying ahead of filing deadlines, making timely estimated payments, and keeping accurate records are key to avoiding unnecessary costs.
With clarity on forms, dates, and rates, businesses can confidently meet Indiana’s tax obligations while focusing on growth in the state.
