Section 115BAA - Concessional Rate of Tax for Domestic Company @25.168%

Shreyansh Ranka | Last updated: 22 November 2022

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Quick Summary

Section 115BAA, introduced by the Taxation (Amendment) Ordinance 2019, offers a reduced corporate tax rate of 25.168% for eligible domestic companies. To avail this benefit, companies must opt-in by the due date for filing their tax return and cannot claim certain deductions like those under Section 10AA or additional depreciation. This section also exempts companies from Minimum Alternate Tax (MAT).

Introduction

S. No.	Particulars	Section 115BAA
1.	Applicability	Any Domestic Company
2.	Rate of Tax	22%
3.	Rate of Surcharge	10%
4.	Effective Rate of Tax (including surcharge and HEC)	25.168% [Tax @22% + Surcharge @10%+ HEC@4%]
5.	Applicability of MAT	Not Applicable
6.	Exercise of the option by the company within the prescribed time	The provision of this section would apply if option is exercised in a prescribed manner on or before the due date u/s 139(1). Such option once exercised, would apply to subsequent assessment years, and cannot be withdrawn later.

Section 115BAA: Domestic Companies Tax Rate 25.168

To strengthen the Start-up ecosystem & support domestic Companies the Government of India through Taxation (Amendment) Ordinance 2019 stirred Section 115BAA which stipulates for reduced rate of tax and exemption from minimum alternate tax (MAT) in respect of certain domestic companies. The analysis of the provision of the new section is tabulated hereunder -

Condition to be fulfilled for availing concessional rate and exemption from MAT

The domestic company should not be a manufacturing or production company.

The total income should be computed

(1)	Without providing following mentioned deductions-
	Deductions mentioned under Section 10AA.
	Provisions for additional depreciation under Section 32(1)(iia).
	Investment-linked deductions mentioned in Section 32AD.
	Deductions under 33AB for rubber, tea, and coffee manufacturing companies.
	Deduction under 33ABA for extraction or production of petroleum or natural gas.
	Deduction under Section 35 for expenses incurred on scientific research, or an amount paid to a university, research association, National Laboratory, or IIT
	Claiming deductions for capital expenditure on businesses specified under Section 35AD.
	Deductions towards expenses incurred on an agricultural extension project or skill development project under Section 35CCC and 35CCD respectively
	Deductions mentioned under Chapter VI-A, except Section 80JJAA, 80LA, and 80M
(2)	Total Income shall be computed without set-off of any loss carried forward or depreciation from any earlier assessment year, if such loss a depreciation is related to any of the deductions mentioned in (1).

Manner of computation of tax liability

S. No.	Particulars	Section 115BAA
1.	Income on which concessional rate of tax is applicable	The rate of tax (i.e., 25.168%) is notwithstanding anything contained in the Income Tax Act,1961, but subject to provisions of special rate of tax on certain incomes.
2.	Rate of tax on other head income	The rate of tax (i.e., 25.168%) and there is no restriction regarding claim of any deduction or allowance permissible under the relevant provisions of the Act.