Section 115BAA:New Tax rate for Domestic Companies

Last Updated On: Sept. 29, 2020, 9:33 a.m.
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SECTION 115BAA: INCOME ON CERTAIN DOMESTIC COMPANIES

A new Section 115BAA has been inserted in the Income Tax Act 1961. This section provides the benefits of reduced corporate tax for domestic companies.

APPLICABILITY:

This section is applicable only to Domestic Companies whose Assessment year starts from 1st April 2020. Once the Domestic Companies exercise the option of availing the lower tax rate under section 155BAA, the company has to continue the same for the subsequent years.

In any previous years, if a person fails to satisfy any condition in subsection 2, the option shall become invalid with respect to the assessment year relevant to the previous year.

Other provisions shall apply if the person has not exercised for the assessment year relevant to that previous year and subsequent assessment years.

RATE OF TAX APPLICABLE:

22% and applicable surcharge and cess.

NON-APPLICABILITY:

This section is not applicable to companies covered/ opted under section 115BA and 115BAB

Sec 115BA: Tax on income of certain domestic manufacturing companies registered on or after 01-04-2016 @ 25% subject to conditions under sec 115BA (2)

Sec 115BAB: Tax on income of new domestic manufacturing companies registered on or after 01-10-2019 @ 15% subject to conditions under sec 115BAB (2)

 

For the purpose of subsection 1 Income Tax shall be computed in the following manner:

1. Without any deduction under the provisions of section 10AA (Newly established Units in Special Economic Zones) or clause (iia) of sub-section (1) of section 32 (Additional Depreciation) or section 32AD (Investment in new plant or machinery in notified backward areas in certain States) or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) or sub-section (2AB) of section 35 or section 35AD or section 35CCC or section 35CCD or under any provisions of  [Chapter VI-A under the heading “C.—Deductions in respect of certain incomes” other than the provisions of section 80JJAA]

ii. without a set-off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i) above

iii. without set-off of any loss or allowance for unabsorbed depreciation deemed so under section 72A, if such loss or depreciation is attributable to any of the deductions referred to in clause (i) above

iv. by claiming the depreciation, if any, under any provision of section 32, except clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

 

OTHER PROVISIONS RELATED TO THE SECTION:

The loss and depreciation referred to in clause (ii) and clause (iii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year

Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April 2020, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April 2019 in the prescribed manner, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April 2020.

In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised an option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LAshall is available to such Unit subject to fulfillment of the conditions contained in the said section.

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