It is a very well-known fact that domestic companies get the option to pay their corporate taxes at the concessional tax rate under section 115BAA and 115BAB of the Income Tax Act, 1961 by filing Form 10IC and Form 10ID pertaining to certain conditions. Moreover, the domestic companies that wish to opt for the concessional tax rates are required to exercise the option from the Assessment Year 2020-21 onwards.
What is corporate tax in India?
A tax levied on the profits of a corporation or a company. The taxes are paid on a taxable income of the company. This taxable income includes revenue minus the cost of goods sold, general and administrative expenses, also the cost of selling and marketing, research and development, depreciation and other operating costs.
In other words, the corporate tax is a direct tax applicable to all the companies incorporated and registered in India under the companies act 2013. These companies are required to pay the corporate tax as per the rate decided by the ministry of corporate affairs.
What is a corporate tax concession?
After the 37th GST council meeting held in the year 2019, the Corporate Tax Rate cut came to light. First time the corporate tax rate went down from 35% to 25.7% that also included cess and surcharge. This was a great benefit for those having huge investment in the sector as it created a higher probability of profits.
These corporate tax concession rates were supposed to be applicable to only those taxpayers who avail of the same on a voluntary basis. So if a company wishes to switch to the lower corporate tax rate policies, the company needs to file Form 10-IC and Form 10-ID.
What is Form 10-IC?
- All the companies that are incorporated and operating in India and paying the corporate tax under section 115BAB of the Income Tax Act are eligible for the filing of Form 10 IC.
- The tax rate as amended by the government is 22% that earlier was 30%.
- The current rate is inclusive of the entire cess and surcharges that are levied, hence, the aggregate percentage reaches up to 25.17% from 34.94%
Functionality of Form 10-IC
- It is a voluntary concession meaning thereby that only the companies that are willing to avail the benefit of the new Corporate tax rate.
- Form 10 IC is considered valid only if it is authenticated by the digital signature or an EVC i.e.electronic verification code.
- Also the details such as name of the company, PAN, registered address of the company, date of incorporation and nature of business is to be mentioned in the form 10-IC
- Once the company adopts this policy, the company must acknowledge the same. Moreover, such companies will have to drop the concessional rate of 25% that was applicable under the earlier.
What is Form 10-ID?
- For all the manufacturing units that are incorporated after 1st October, 2019 and are willing to adopt the new tax rates needs to file Form 10 ID.
- The new tax rate is 15% reduced from earlier 25% including other incentives.
- The form 10 ID is optional for the manufacturing firms that are paying taxes under section 115BAB of the Income Tax Act.
Functioning of Form 10 ID
- The manufacturing units that acquires the concessional rate needs to file the form 10 ID along with its basic details like commencement of manufacturing activities.
- Moreover, it is mandatory for the company to ensure that the company will fulfill the conditions laid down by the government with regards to the concessional tax rate.
- Also, once the company adopts the concessional tax rate, it can not be dropped.
Due date for filing Form 10IC and 10ID
For the companies that adopt the tax rate under corporate tax concession, needs to file the form 10IC and 10ID with appropriate information before the due date of filing the Income tax return.
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