Amendment in the corporate tax of India 

Normally the domestic Companies are taxed at the rate of 30% (company having turnover less than  250 crore the tax rate shall be 25%.) To uplift the economy and to promote make in India the government of India GOI has provided certain lower rate of tax to domestic Companies when complied with the conditions specified which shall be discussed in this article below.

Amendment in the corporate tax of India

With an objective to increase GDP and to promote growth and investment in India, the president of India has promulgated an ordinance act called as the Taxation laws (amendment) ordinance,2019 which was announced by the Union finance minister.

Amendments made in corporate tax

  • Section 115BAA
  • Section 115BAB
  • Section 115BA

Section-115BAA Tax on Income of Certain Domestic Company

A new section 115BAA – Tax on Income of Certain domestic Company had been introduced into the Income Tax act, 1961 via Taxation laws amendment (ordinance) act,2019 with effect from 1st April 2020.

As per sec-115BAA, the total income of the domestic Company shall be taxed at the rate of 22% plus surcharge and applicable cess,i.e.,25.168% if the following below conditions has been satisfied

  • The total income of such domestic Company shall be computed without claiming any deductions or incentives in respect of the following provisions:-
    • Section 10AA
    • Section 32(1)(iia)
    • Section 32 AD
    • Section 33AB
    • Section 33ABA
    • Clause ii or iia or iii of Section 35(2AB)
    • Clause ii or iia or iii of Section 35(2AA)
    • Clause ii or iia or iii of Section 35(1)
    • Section 35CCC
    • Section 35CCD
    • Under any provision of chapter VIA other than Section 80JJAA
  • The total income of such domestic Company shall be computed without any setoff or carry forward of the losses of any previous year and such loss shall be deemed to have been utilized already and further no deduction shall be available.
  • Only depreciation under section 32 has to be claimed and no depreciation under section 32 (1)(iia) shall be available
  • The option under section should be exercised before the due date for filing return of income under section 39(1)

The Minimum Alternative Tax (MAT) provisions under section 115JB shall not apply to the person opting section 115BAA

Note: once the option has been exercised, it shall apply to all subsequent assessment years and cannot be withdrawn for the same year or for any subsequent years

Section-115BAB Tax on Income of Certain New Manufacturing Domestic Company

A new section 115BAB – Tax on Income of Certain New Manufacturing domestic Company had been introduced into the Income Tax act, 1961 via Taxation laws amendment (ordinance) act,2019 with effect from 1st April 2020.

As per sec-115BAB, the total income of the new manufacturing domestic Company shall be taxed at the rate of 15% plus surcharge and applicable cess, i.e.,17.16%, if the following below conditions has been satisfied

  • The company should be incorporated or set up on or after 1st day October 2019 and the manufacturing should be commenced before 31st march 2023.
  • The company should be engaged only in the business of manufacturing or any research in relation to
  • The total income of such new manufacturing domestic Company shall be computed without claiming any deductions or incentives in respect of the  following provisions
    • Section 10AA
    • Section 32(1)(iia)
    • Section 32 AD
    • Section 33AB
    • Section 33ABA
    • Clause ii or iia or iii of Section 35(2AB)
    • Clause ii or iia or iii of Section 35(2AA)
    • Clause ii or iia or iii of Section 35(1)
    • Section 35CCC
    • Section 35CCD
    • Under any provision of chapter VIA other than Section 80JJAA
  • The total income of such new manufacturing domestic Company shall be computed without any setoff or carry forward of the losses of any previous year and such loss shall be deemed to have been utilized already and further no deduction shall be available
  • Only depreciation under section 32 has to claim and no Additional  depreciation under section 32 (1)(iia) shall be available
  • The option under section should be exercised before the due date for filing return of income under section 39(1)

The Minimum Alternative Tax (MAT) provisions under section 115JB shall not apply to the person opting section 115BAB

Note: once the option has been exercised, it shall apply to all subsequent assessment years and cannot be withdrawn for the same year or for any subsequent years

Section-115BA Tax on Income of Certain Domestic Manufacturing Company

As per sec-115BA, the total income of the domestic manufacturing Company shall be taxed at the rate of 25% plus surcharge and applicable cess, if the following below conditions has been satisfied

  • The company should be incorporated or set up on or after 1st March of 2016
  • The company should be engaged only in the business of manufacturing or any research
  • The total income of such domestic Company shall be computed without claiming any deductions or incentives in respect of the  following provisions
    • Section 10AA
    • Section 32(1)(iia)
    • Section 32AC
    • Section 32 AD
    • Section 33AB
    • Section 33ABA
    • Clause ii or iia or iii of Section 35(2AB)
    • Clause ii or iia or iii of Section 35(2AA)
    • Clause ii or iia or iii of Section 35(1)
    • Section 35AC
    • Section 35AD
    • Section 35CCC
    • Section 35CCD
    • Under any provision of chapter VIA other than Section 80JJAA
  • The total income of such domestic manufacturing Company shall be computed without any setoff or carry forward of the losses of any previous year and such loss shall be deemed to have been utilized already and further no deduction shall be available
  • Only depreciation under section 32 has to claim and no depreciation under section 32 (1)(iia) shall be available
  • The option under section should be exercised before the due date for filing return of income under section 39(1)

If a person exercises the option as per section 115BAB, then the option under section 115BA shall be withdrawn and no longer available.

Note: once the option has been exercised, it shall apply to all subsequent assessment years and cannot be withdrawn for the same year or for any subsequent years

 Applicability of Mat provision 

The rate of Minimum Alternative Tax (MAT) under section 115JB shall be reduced to 15% from 18.5%.

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