To uplift the economy and promote growth the government of India has inserted certain sections through the Taxation laws amendment (ordinance) act, 2019. Section 115BAA is one of the aforesaid sections which shall be discussed in this article in brief.
A new section 115BAA – Taxation on Income of Certain domestic Companies has been introduced into the Income Tax act, 1961 via Taxation laws amendment (ordinance) act, 2019 on the date of 20th September 2019 with effect from 1st April 2020.
Rate of Tax
As per the provisions of Section 115BAA, at the option of domestic Company the Income Tax payable by such person in respect of his total income shall be taxed at the rate of 22% plus surcharge and applicable cess, i.e., 25.168% on satisfaction of the conditions as specified in the act in respect of such section.
Conditions to have complied
Following are the conditions that have to be satisfied to opt section-115BAA
- The total income of such domestic Company shall be computed without claiming any deductions or incentives in respect of the following provisions
- Section 10AA-Deductions in respect of Newly Established Unit in SEZ.
- Section 32(1)(iia)- Additional Depreciation in respect of New Plant & Machinery.
- Section 32AD- Deduction in respect of investment in new Plant & Machinery in notified backward areas in certain states.
- Section 33AB- Deduction in respect of Investment in Deposit accounts for Tea, Coffee, Rubber manufacturing companies.
- Section 33ABA- Deduction in respect of Deposits in site restoration fund by companies engaged in the business of extraction or production of petroleum or natural gas or both in India.
- Clause ii or iia or iii of Section35(2AB)- Deduction in respect of the Expenditure incurred on Scientific research by the companies engaged in the business of biotechnology or in any business of manufacture or production of any article or thing specified in the list of Eleventh Schedule.
- Clause ii or iia or iii of Section 35(2AA)- Deduction in respect of the amount paid to National Laboratory or a University or an Indian Institute of Technology or a specified person with a specific direction that the amount paid shall be used for scientific research undertaken under a program approved in this behalf by the prescribed authority.
- Clause ii or iia or iii of Section 35(1)- Deduction in respect of expenditure incurred on scientific research.
- Section 35CCC- Deduction in respect of Expenditure incurred Agriculture Extension Project.
- Section 35CCD- Deduction in respect of Expenditure incurred on the Skill Development Project.
- Under any provision of chapter VIA(Deduction to be made on total Income Computation) other than Section 80JJAA.
- The Computation of total income of such domestic Company shall not include any setoff or carry forward losses of any previous year and such loss shall be deemed to have been utilized already and further no deduction shall be made available.
- Depreciation under section 32 if any shall be made available and no depreciation under section 32 (1)(iia) shall be available.
- The option under section should be exercised in the prescribed manner on or before the due date for filing return of income under sub-section (1) of section 139.
The Domestic Companies opting section 115BAA are not required to pay Minimum Alternative Tax (MAT) as per the provisions of section 115JB.
Note: Once the Domestic company exercised option under section 115BAA, it shall be made applicable to all subsequent assessment years and cannot be withdrawn for the same year or for any subsequent years.