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Section 115BAA so inserted, provides that,-

(a) A domestic company shall at its option, pay tax at a lower rate of 22 per cent for any previous year relevant to the Assessment Year beginning on or after 1st April 2020, subject to certain conditions, including that the total income should be computed without claiming any deduction or exemption:

(b) the option is required to be exercised by the company before the due date of furnishing return of income: and

(c) the option once exempted cannot be subsequently withdrawn and shall apply to all subsequent assessment years.

Analysis:- It is very easy to say that rate of the domestic company reduced from 30% to 22% but there are various condition which we need to focus:-

  • Section 115JB of the Act relating to Minimum Alternate Tax (MAT) so as to, inter alia,provides that the provisions of said section shall not apply to a person who has exercised the option referred to under newly inserted Section 115BAA. Hence in simplified word we can said that MAT is not applicable on the company which opt Section 115BAA and no earlier MAT Credit will be allowed.
  • A domestic company which would exercise option for availing benefit of lower tax rate under Section 115 BAA shall not be allowed to claim set off of any brought forward loss on account of additional depreciation for an Assessment Year for which the option has been exercised and for any subsequent Assessment Year.
  • Further, as there is no time within which option under Section 115BAA can be exercised, it may be noted that a domestic company having brought forward losses on account of additional depreciation may, if it so desires, exercise the option after set-off of the losses so accumulated.
  • As regards the allow ability of brought forward MAT credit, it may be noted that as the provisions of Section 115JB relating to MAT itself shall not be applicable to the domestic company which exercises option under Section 115BAA, it is hereby clarified that the tax credit of MAT paid by the domestic company exercising option under Section 115BAA of the act not be available consequent to exercising of such option.
  • Further, as there is no lime line within which option under Section 115BAA can be exercised, it may be noted that a domestic company having credit of MAT may, if it so desires, exercise the option after utilising the said credit against the regular tax payable under the taxation regime existing prior to promulgation of the Ordinance.

Conclusion:- First check any addition in Plant & Machinery on which we can claim 20% deduction and MAT credit and Carried forward losses.As there is no time limit so we can avail the benefit of this section after availing benefit of Additional Dep,Carried Forward losses,Mat Credit,if any.

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May 2024