Understanding Indiana's franchise tax

Indiana does not impose a separate general franchise or privilege tax on most businesses. Ordinary C-corps, S-corps, and LLCs are generally subject to Indiana’s adjusted gross income (corporate income) tax rather than a separate franchise tax.

Indiana's tax-style levy targets just one specific sector: financial institutions. Financial institutions that meet Indiana’s definition of a ‘taxpayer’ under the Financial Institutions Tax (FIT) file Form FIT-20. 

FIT is imposed at a rate of 4.9% of apportioned income for tax years beginning after December 31, 2022. Certain entities (such as insurance companies, S-corps exempt under IRC § 1363, and nonprofit corporations, including federally chartered credit unions) are exempt from FIT.

Most businesses deal with Indiana's corporate income tax instead, which applies to net income rather than net worth or capital stock.

Who must file the franchise tax in Indiana?

If your business isn't about money, you can probably relax, as only financial institutions need to worry about Indiana's FIT. 

Indiana's Financial Institution Tax targets entities that derive their income from lending, deposit-taking, or other banking services, while ordinary corporations and LLCs are subject to the state's corporate income tax. The official rules live in the FIT booklet published by the Department of Revenue (DOR).

What counts as a "financial institution"? Indiana uses a fairly traditional definition. Entities subject to FIT include:

• Banks  
• Trust companies 
• Savings and loan associations 
• Credit unions 
• Loan or investment companies 
• Any other organization "carrying on the business of a financial institution."

Meeting the definition of a financial institution is the first step. Indiana then looks at your in-state activity. Under DOR regulations, a taxpayer is presumed to “regularly solicit business” in Indiana if it has at least $5 million of assets/deposits attributable to Indiana or engages in certain activities with 20 or more Indiana customers. 

But you can also have FIT nexus through other connections, such as maintaining an office, employees, or property in the state.

Indiana franchise tax filing requirements

You'll need the primary FIT-20 form plus a stack of federal paperwork and Indiana-specific schedules that must line up perfectly.

Start with the current year's FIT-20 return and instruction booklet form. The Indiana Department of Revenue packages everything together, so you won't search across multiple pages. Their Business Tax page keeps all active forms in one place.

FIT-20 requires four critical pieces of information that cause most filing errors:

• Your apportioned income after applying Indiana's single-factor receipts formula
• Deductible Indiana net operating losses and net capital losses
• All payments and credits on file, including quarterly estimates
• The 4.9% tax calculation; if your tax calculation results in an overpayment, you can generally claim a refund or credit under Indiana’s refund procedures

The return mirrors your federal filing, so attach a copy of your latest Form 1120 or 1120-S. The FIT booklet includes built-in schedules for apportionment, NOL carryforwards, and tax credits. Fill out every schedule, even if the result is zero.

Filing fees and processing

Indiana doesn't charge separate filing fees for FIT-20, which makes it one of the few business tax bright spots. Your only cost is the actual tax owed.

Due dates and deadlines

If your financial institution meets Indiana's filing thresholds, your FIT-20 return is due on the 15th day of the fifth month after the close of your taxable year. For most calendar-year filers, that's April 15. You need at least 90% of the liability paid by then to avoid penalties.

Meeting that annual deadline is only half the job. Indiana expects financial institutions filing FIT-20 to pre-pay the tax through quarterly estimated payments if the year's bill exceeds $2,500. The schedule for calendar-year filers is:

• Q1 on April 20
• Q2 on June 20
• Q3 on September 20
• Q4 on December 20

Fiscal year filers shift those due dates to the 20th day of the fourth, sixth, ninth, and twelfth months of your fiscal year. 

How to file

You have three options for filing your Financial Institution Tax return with Indiana: use the state's INTIME portal online, mail a paper Form FIT-20, or hand it off to a tax professional.

Indiana strongly pushes electronic filing, and they're right to. The current FIT-20 return and instructions are found in the Financial Institution Tax booklet, which you can grab from the Department of Revenue.

The electronic filing process is straightforward:

1. Gather your data, including  total and Indiana-sourced receipts, net operating loss carryforwards, capital gains and losses, prior-year payments, and any supporting schedules from the FIT-20 booklet
2. Log in to INTIME (first-time users need to create a username and link their business tax account using their federal EIN and a recent Indiana tax payment)
3. Navigate the wizard by choosing "New Return," selecting "FIT-20," and following the prompts
4. Handle payment by scheduling an ACH debit or uploading an EFT receipt if you've already paid by wire
5. Submit and save
6. Print the confirmation page for your records, since INTIME stamps the exact date and time received

Penalties and compliance

If you file or pay late, Indiana generally imposes a 10% penalty on the unpaid tax (subject to a minimum overall penalty of $5 and a maximum of 100% of the unpaid tax), plus interest at the statutory rate on the unpaid tax from the original due date until paid. Interest accrues only on tax, not on the penalty.

Late payment brings its own pain. The same 10% penalty applies to any unpaid balance, plus daily interest that keeps running until you clear the debt. The real damage goes beyond money. 

The DOR can place your entity in a state of non-compliance, which can hinder your ability to secure licenses, financing, or expand into other states. Other states check your Indiana status before issuing certificates of authority, so one missed return here can create expensive registration problems elsewhere.

Additional Indiana state taxes

While the Financial Institution Tax applies specifically to banks and similar entities, most businesses face Indiana's standard tax obligations. Non-financial institutions are subject to corporate income tax, along with sales tax, employment taxes, and local income taxes where applicable.

Financial institutions remain subject to these same sales, employment, and local tax obligations in addition to their specialized Financial Institution Tax requirements.

Extensions and amendments

Extensions are available electronically through INTIME or on paper before the filing deadline, matching the federal extension period. However, you must still make a "fifth-quarter" payment covering at least 90% of your current year's liability by the original due date, as extensions only delay paperwork, not payments.

For amendments, use the same FIT-20 form, check "Amended," and attach schedules that explain the changes. Indiana doesn't charge amendment fees, but additional tax owed incurs standard 10% penalties plus interest. Amended filings typically process within a few weeks through your INTIME account.

Discern automates Indiana compliance management

Indiana's Financial Institution Tax creates coordination challenges with quarterly payments and supporting schedules, where missed deadlines trigger penalties. Multi-state operations multiply this complexity across different filing calendars, annual reporting requirements, and nexus thresholds.

While Discern can't help with Indiana Financial Institution Tax compliance, our system covers annual business filings for all 51 jurisdictions, plus deadline tracking and notifications for Indiana tax obligations. Ready to streamline multi-state compliance? Book a demo today.