Form 10IB:Application for exercise of option under Section 115BA

Last Updated On: March 5, 2022, 7:56 p.m.
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FORM 10IB- APPLICATION FOR EXERCISE OF OPTION UNDER SECTION 115BA 

Are you a startup looking for tax breaks? If so, this article will help you learn more about Form 10-IB of the Income Tax Act.

The Central Board of Direct Tax (CBDT) issues FORM 10-IB to allow startups to choose a more economical tax rate. The notification states rule 21AD of the income tax laws enabling an option under sub-section 115BA(4) of the Income Tax Act. However, the report states that the filing will consider requirements of sub-section (4) of subdivision 115BA of the Income Tax Act. Private companies, who are eligible for any preceding year starting on or after 1 April 2017, can apply through Form 10-IB.

 

In Budget 2020, the Finance Ministry added sections 115BAA and 115BAB into the Income Tax Act,1961. They have provided companies with several tax benefits, including a reduced tax rate for companies. While all existing domestic companies can pay tax at a concessional rate of 22%, new companies established on or after 1 Oct 2019, and commencing operations before 31 March 2023 can pay tax at 15%. However, such reduced tax rates come with the surrender of several deductions and incentives. Such companies cannot claim any minimum alternate tax, whereas those that opt-out of such reduced rates shall continue to enjoy benefits at a MAT of 15%.

 

All these regulations will help regulate the requirements of section 111A and section 112 and have rules regarding the income tax. This includes private company income for any preceding year related to the evaluation year. These rules are applicable for periods that fall on or after April 2017. Furthermore, they allow individuals to comply with provisions stated under sub-section (2) to calculate their Liabilities at the rate of 25%. To meet all the requirements mentioned in subsection(1), companies must have continuous setup and recognition.

 

BENEFITS OF FORM 10-IB:

Form 10-IB gives companies the choice to apply under the terms of sub-section (4) of division 115BA of the Income Tax Act. Hence, it allows such relaxations for any former year relating to an assessment year commencing on or after 1 April 2017. Under Section 12A, the Income Tax Act, 1961, Form 10 serves as an appeal for the enrollment of a trust or company. Business owners now can submit Form 10 online by using the e-filing website of the income tax department.

The form contains all the information regarding the choice to apply under sub-section (4) of 115BA of the Income Tax Act. It must, therefore, contain the following company details;

  • Name of the company 
  • Whether this is a domestic company or not 
  • PAN number
  • Registered address 
  • Date of incorporation 
  • Nature of the business or activities of the company.

 

Let us understand the rules under 21AD of Section 115BA

These rules have to do with the right to employment under the terms of sub-section (4) of division 115BA by a person or a domestic firm. These rules are applicable for any previous year related to the assessment year commencing on or after 1 April 2017.

Individuals can file proceedings related to such causes via Form No. 10-IB. Additionally, the benefits provided by Form 10-IB regarding subrule (1) shall occur electronically. This can be either via digital signature or automatic confirmation code.

The rules from the principal director general of income tax or director-general of income tax designate the method for filing the form.

It also specifies the data structure, rules, and practice of the production of automatic verification code. It refers to sub-rule (2) for matters regarding the confirmation of the person submitting the Form. Additionally, it will be accountable for maintaining the proper security, archival, and retrieval procedures.

 

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