2 Concessional Rates of Income Tax @ 22% for Companies in India

Concessional Rates of Income Tax @ 22% for Companies in India Applicable from AY 2020-21 – FY 2019-20

♦ Income tax @22% in place of 25% or 30% under the Section 115-BAA

1. Income Tax @ 22% is applicable on the Companies

(i) All Indian companies are permitted to avail concessional rate of income tax @22% plus 10% ‘fixed’ surcharge and 4% higher education cess

(ii) However these companies are ‘not’ permitted to avail the followings deductions ‘after’ availing Income Tax @ 22%

(a) ‘No’ deduction under the section 10AA for a unit as established in Special Economic Zones (SEZs)

(b) ‘No’ deduction under the Section 32(1)(iia) for the ‘additional’ depreciation against ‘new’ addition in plant and machinery by the ‘manufacturing’ companies.

(c) ‘No’ deduction under the section 33AB for the manufacturing of ‘Tea’, coffee and rubber

(d) ‘No’ deduction under the section 35 for the Scientific ‘Research’ Expenditures

(e) ‘No’ deduction under the section 35AD for the ‘capital’ expenditures incurred against ‘specified’ business

(f) ‘No’ deduction under the section 35CCC or 35CCD for the expenditures against ‘agricultural’ extension project or ‘skill’ development project

(g) (a) ‘No’ deduction for chapter VI-A under the heading ‘C’ like deductions under section 80H to 80TT

(b) However some ‘special’ deductions are permitted for the companies under the section 80G, 80GGA, 80GGB, 80JJAA, 80LA and 80M for the AY 2020-21 and 80JJAA, 80LA and 80M for the AY 2021-22 and onwards

2. Important Points

(i) ‘No’ Minimum Alternative Tax (MAT) concept under the Section 115JB is applicable on the company where availing income tax @22%. Hence non-applicability of the MAT is greatest advantage of the option under the section 115BAA.

(ii) ‘No’ MAT credit is permitted where the company is availing income tax @ 22%

(iii) (a) ‘No’ brought forward ‘losses’ and unabsorbed ‘depreciation’ are permitted under the Section 10AA, 32(1)(iia), 33AB, 35, 35AD, 35CCC or 35CCD

 (b) Hence ‘normal’ brought forward losses and unabsorbed depreciation ‘other than’ Abovementioned sections under the para 1(ii)(a) to (g) are permitted

(iv) ‘No’ withdrawal option is available against income tax @22% in the ‘subsequent’ years. Hence once this option is opted thereafter withdrawal in ‘subsequent’ years is ‘not’ permitted

(v) Income tax @ 22% is permitted from AY 2020-21 and also permitted in ‘subsequent’ years where same is not opted from Ay 2020-21.

(vi) Form Number 10-IC is to be filed ‘before’ the due date of filing of return of incomes under the section 139(1) for availing income tax @22%

Concessional Rates of Income Tax @ 22% for Companies in India

(vii) Presently income tax @25 % or 30% plus surcharge and education cess is applicable where the Indian company is ‘not’ availing Income tax @ 22% under the section 115BAA

(viii) ‘Comparison’ between ‘present’ rate of income tax and ‘future’ effective rate of Income tax under the section 115BA and 115BAA respectively

    • Present Rate of Income tax @ 25% or 30% under the section 115BA  

(aa) ‘Effective Rate’ of Income tax is @26% (25% + 1% higher education cess) where taxable profits in the financial year 2019-20 are below 1 crore and also turnover is below 400 crore in the financial year 2017-18

(ab) Effective Rate of Income tax is @27.82% (25% +1.75% surcharge + 1.07% education cess) where taxable profits in the financial year 2019-20 are between 1 crore and 10 crore and also turnover is below 400 crore in the financial year 2017-18

(ba) Effective Rate of Income tax is @31.20% (30% + 1.2% higher education cess) where taxable profits in the financial year 2019-20 are below 1 crore but  turnover is 400 crore and above in the financial year 2017-18

(bb) Effective Rate of Income tax is @33.384% (30% +2.10% surcharge + 1.284% higher education cess) where taxable profits in the financial year 2019-20 are between 1 crore and 10 crore and also turnover is 400 ‘crore’ and above in the financial year 2017-18

    • Future Rate of Income tax @ 22% under the Section 115BAA
      • Effective Rate of Income tax @25.168% (22%+2.2% surcharge + 0.968% higher education cess) where taxable profits in the financial year 2019-20 are without any limit in the financial year 2019-20 and also without any limit on the turnover in the financial year 2017-18

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Disclaimer :The contents of this presentation are solely for informational purpose. Neither this presentation nor the information contained herein constitutes a contract or will form the basis of a contract.  The material contained in this presentation does not constitute/substitute professional advice that may be required before acting on any matter. While every care has been taken in the preparation of this presentation to ensure its accuracy at the time of publication, Satish Agarwal assumes no responsibility for any errors which despite all precautions, may be found herein. In no event shall we be liable for direct or indirect or consequential damages, if any, arising out of or in any way connected with the use of this presentation or the information contained herein.

(Author can be reached at email address satishagarwal307@yahoo.com or on Mobile No. 9811081957)

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3 Comments

  1. CA SANDEEP JAIN says:

    Sir, Please tell me whether FORM 10IC has to be submitted for every year to claim 22% rate. We have submitted 10IC Form while filing ROI for A.Y. 2020-21.

  2. JITENDER RANKA says:

    New rates of income tax is just any eyelash and no significance. This way incentive can’t be created for new investments.

    Further dividend is also subject to Income tax and to the tune of approx 43% for people with income above 5cr.

    Don’t forget taxing dividend is already a double taxation of same profits that a company distributes. Actually there shouldn’t at all be any tax on dividends. People doing business in company format end up paying Income tax over 60%.

    Actually individuals animal spirit for business is getting killed why would anyone do business when his incentive to do business is to earn big profits and there is heavy tax of upto43%(incl. Surcharge & cess) in proprietorship and above 60% tax on profits of company( income tax on company+ tax on after tax income when it is distributed to owners of company). This way it is very-2 discouraging scenario for businesses in India. When there’s no incentive left for doing business, why will people invest in business?

    If at all business has to be given boost then there must not be any surcharge at all. Remove all surcharges… India already have highest tax rates and increasing tax slab…then why again surcharge on higher income people…They already pay tax at highest rate of slab.

  3. Vijay Kumar Dadoo says:

    DO TAXPAYERS REQUIRE SOCIAL SECURITY ? IS GOVERNMENT PROVIDING SOME SOCIAL SECURITY PRESENTLY. DO YOU THINK THAT THE REVENUE COLLECTION WILL INCREASE MANY FOLDS IF SOCIAL SECURITY IS PROVIDED TO TAX PAYERS ?

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