Section 115BAA and 115BAB for reduced tax rate for Companies. What are benefits in these sections.

Question BankCategory: Income TaxSection 115BAA and 115BAB for reduced tax rate for Companies. What are benefits in these sections.
Vinay asked 3 months ago

Section 115BAA and 115BAB for reduced tax rate for Companies. What are benefits in these sections.

3 Answers
A. Kumar answered 3 months ago

SECTION 115BAA:-
Section 115BAA was introduced though ordinance on 20th September 2019 and benefit under this section is available from FY 2019-20. This section gives option to existing as well as new domestic companies to pay tax at the reduced rate of 22% instead of general rate of 25%/30%.  To avail this facility of reduced rate, the domestic company have to file form 10-IC on or before the due date of filing of income tax return. and once this option is exercised than it cannot be withdrawn. 
To be eligible to avail this facility of reduced tax rate of 22% , such companies should not avail any exemptions/ incentives under difference provisions of income tax like 10AA, 32 (additional depreciation), 33AB, 33ABA, 35, 35AD, 35CCC, 35CCD, 80IA, 80IAB, 80IAC, 80IB except 80JJAA.

Vinay answered 3 months ago

Thanks for reply about sec 115BAA
Please explain reduced rate of 15% under section 115BAB can be used for the existing company or not. I want to opt section 115 BAB with reduced rate of 15% for my existing domestic company. what are the conditions. 

Aditya answered 2 months ago

Following are the important points to be kept in mind for using reduced tax rates as given under section 115BAB:-

  1. Reduced rate of 15% is applicable for companies opting for section 115BAB excluding surcharge & cess. 
  2. Benefits of section 115BAB is available only to New Domestic Manufacturing companies.
  3. Benefits of section 115BAB is available from FY 2019-20 i.e. Assessment year 2020-21.
  4. To avail the benefits of section 115BAB, the companies have to be set up and registered on or after 1 October 2019 and should have commenced manufacturing on or before 31 March 2023. (Splitting , reconstruction and use of earlier machinery and old businesses not allowed)
  5. Company who wants to opt for section 115BAB, should not be engaged in the following businesses: –
    • Software Development
    • Mining
    • Conversion of marble blocks or similar materials into slabs
    • Bottling of gas into cylinders
    • Printing of books
    • Production of cinematograph films
    • Any other notified
  6. The company does not claim any of the deductions/exemptions/benefits mentioned below in computing the total income for the purpose of income tax viz: –

    • Tax Holiday for Units in Special Economic Zones (Section 10AA)
    • Additional Depreciation u/s 32((iia)
    • Investment Linked deduction u/s 32AD
    • Benefits u/s 33AB or 33ABA
    • Accelerated R&D allowance (Clause (ii), (iia), (iii) of Sub Section (1), Sub Section (2AA) or Sub Section (2AB) of Section 35)
    • Allowances u/s 35AD, 35CCC or 35CCD
    • Deductions under Chapter VIA under the heading C: Deductions in respect of certain incomes, excluding deduction for additional employment u/s 80JJAA
    • Depreciation us/ 32 has been claimed without additional depreciation u/s 32(1) (iia)
  7. To opt for reduced rate of 15% under section 115BAB, company has to exercise the option on or before the due date of filing income tax returns i.e usually 30th September of the assessment year.
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