Tax on Domestic Companies under Section 115BAB - Income Tax - Ready Reckoner - Income Tax

Section 115BAB : 15% rate of tax on certain Domestic Companies (w.e.f. 01.04.2020) [ Read with Rule 21AF ] Conditions: - Domestic Companies has been setup registered on or after 1 st October, 2019 and commence manufacturing business on or before 31 st March, [ 2023 2024 Substituted vide Finance Act, 2022 w.e.f. 01-04-2022] It should not be formed by splitting up or reconstruction of business already in existence as is referred in section 33B . Company does not use Second hand Plant Machinery. However, second hand plant machinery which brought from outside India can be use. Also, company cannot use old plant machinery except if value of such old P M is 20% of total value of P M used by the company. Does not use a building previously used as a hotel or a convention centre. ( Hotel means a hotel of two-star, three-star or four-star category as classified by the Central Government. Convention centre means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed). Company should be engaged in the business of manufacture or production of any article or thing, and research in relation to such article or thing. The company can also be engaged in distribution of such article or thing manufactured or produced by them. Business of manufacture or production of any article or things does not include business of :- Development of Computer Software Mining Conversion of Marble Blocks or similar items into slabs Bottling of Gas into Cylinders Printing of Books or production of Cinematograph film Any other notified business Note : Business of power generation or distribution shall be treated as manufacturing business Company should not claim benefit of other deductions under IT Act:- Section 10AA : Deductions from the Special Economic Zones (SEZ) unit. Section 32(1)(iia) : Additional Depreciation Section 32AD : Expenditure that is allocated on machinery and new plants manufactured in the notified backward areas in the states of Bihar, West Bengal, Telangana and Andhra Pradesh. Section 33AB : Deduction given on rubber manufacturing, tea and coffee. Section 33ABA: Deposits made to the site restoration fund by the companies producing or extracting petroleum and natural gas in India. Section 35(1)(ii), (iia), (iii) , 35(2AA) , 35(2AB) Scientific Research Section 35AD : Capital spent by any particular business. Section 35CCC : Investment in agriculture extension projects. Section 35CCD : Investment in projects concerning skill development. Any deduction in respect of certain income under chapter VI-A (except Section 80JJAA , 80M ) Company cannot set-off any B/F loss or Unabsorbed depreciation which is attributable to deduction referred above. Such loss or unabsorbed depreciation shall be deemed to have been already given full effect to and no further deduction for such loss shall be allowed for any subsequent year. Other Conditions If the above conditions are not satisfied in any PY, the exercise of the option will be invalid for that PY and subsequent PYs and normal provisions of the Act shall apply. Option has to be exercise upto the due date of ROI u/s 139 Once the option is exercised it can t be withdrawn for the same or any other PY. As per the rules of CBDT, this option will be present in Form 10-ID . One needs to submit the form online under EVC or a digital signature. Rate of tax Income of the company has been set-up and registered on or after the 1st day of October, 2019, and has commenced manufacturing or production of an article or thing on or before the 31st day of March, 2024, shall, at the option of such person, be computed at the @15%, if the conditions contained in section 115BAB(2) are satisfied. Other Income like Income from House Property, Income from Other Sources etc shall be taxable @22%. Short term capital gain on transfer of depreciable assets shall be taxable @15%, However, STCG on other non-depreciable assets shall be taxable @22%. Special Income shall be taxable as per Special Rates of Tax i.e., U/s 111A , 112 , 112A . If Excess profit computed by AO to be treated as income of company and will taxable @30%. Note:- 1.) If it appears to AO that, owing to close connection between the company and other person or for any other reason, the course of business is so arranged that business transacted between them produces more profit than ordinarily expected to the company. 2.) If transaction amount is more than Rs. 20 Crores, It will be covered under specified domestic transaction under section 92BA and transfer pricing provision shall apply. Surcharge will be applicable @10% irrespective of Total Income. Health Education Cess will be levied @ 4% always. Company opting for tax rate under section 115BAA is not required to pay MAT. Since this section applies to Newly setup Companies, there is no question of brought forward MAT Credit. Important Notifications circulars The Central Board of Direct Taxes received condonation the delay in filing of Form No. 10-IC or Form No. 10-ID as per Rule 21AE or Rule 21AF respectively of the Income-tax Rules, 1962 for Assessment Years 2020-21, 2021-22 and 2022-23. [ Circular no. 17/2024 dated 18.11.2024 ] No application for condonation of delay in filing of Form No. 10-IC or Form No. 10-ID shall be entertained beyond three years from the end of the assessment year for which such application is made. The time limit for filing of such application within three years from the end of the assessment year will be applicable for application filed on or after the date of issue of this Circular. A condonation application should be disposed of, as far as possible, within six months from the end of the month in which such application is received by the Competent Authority. [ Circular no. 17/2024 dated 18.11.2024 ]