Income tax rates are decided and governed by Income Tax Act 1961 and are subject to change every year. This article will cover the income tax rates applicable to Domestic Companies for the Assessment Year 2019-2020 and Assessment Year 2020-2021 (As per the Taxation Laws (Amendment) Act, 2019) respectively, also cover Minimum Alternate Tax (MAT) provisions alongwith calculation of book profit under section 115JB.
Page Contents
I) Corporate Tax Rate Applicable for AY 2019-2020-
A) For All Existing Domestic Companies [As per section 115BA]:
| Particular | Income Tax |
| Companies with Turnover in 2016-17 upto ₹ 250 crores | 25% |
| Companies with Turnover in 2016-17 exceeding ₹ 250 crores | 30% |
Surcharge: 7% of taxable income if net income exceed 1 crore but does not exceed 10 crore and 12% of taxable income if net income exceed 10 crore.
Health and Education Cess: 4% of Income Tax Plus Surcharge
Note: In AY 2019-20, Minimum Alternate Tax (MAT)will be levied @18.5% on Book profit
II) Corporate Tax Rate Applicable for AY 2020-21:
As per the Taxation Laws (Amendment) Bill, 2019, the amended slab rates for companies are as under:
A) For All Existing Domestic Companies [As per section 115BA]:
| Particular | Income Tax |
| Companies with Turnover in 2017-18 upto ₹ 400 crores | 25% |
| Companies with Turnover in 2017-18 exceeding ₹ 400 crores | 30% |
Surcharge: 7% of taxable income if net income exceed 1 crore but does not exceed 10 crore and 12% of taxable income if net income exceed 10 crore.
Health and Education Cess: 4% of Income Tax Plus Surcharge
Note: In AY 2020-21, Minimum Alternate Tax (MAT) will be levied @15% on Book profit (As per the Taxation Laws (Amendment) Bill, 2019)
B) For All Existing Domestic Companies (irrespective of its date of incorporation or nature of activity) [As per section 115BAA]
Income Tax Rate: 22% (Subject to Note 1)
Surcharge: 10% of taxable income if net income exceed 1 crore.
Health and Education Cess: 4% of Income Tax Plus Surcharge
Note:
I) Following conditions need to be satisfied for getting benefit of lower tax rate introduced by Section 115BAA:
a. without claiming exemption/ deduction
-
- u/s 10AA [SEZ units],
- u/s 32(1)(iia) [additional depreciation qua new plant and machinery @ 20%/ 30%],
- u/s 32AD [15% on new assets in undertaking set up in specified backward areas in Andhra Pradesh, Bihar, Telangana, and West Bengal]
- u/s 33AB [specified percentage of amounts deposited with Tea/ Coffee/ Rubber Board]
- u/s 33ABA [specified percentage of amounts deposited in Site Restoration Account]
- u/s 35(1)(ii)/(iia), 35(2AA) [specified deduction for scientific research]
- u/s 35AD [expenditure on specified business]
- u/s 35CCC [expenditure on agricultural extension project]
- u/s 35CCD [expenditure on skill development project]
- under Part C of Chapter VIA except section 80JJAA of the Act (such as 80IA/IB/IC/ID/IE etc.)
b. Without set-off of any brought forward losses to the extent such loss relates to deductions mentioned above. Such losses would also not be allowed to be carried forward to subsequent years.
c. After claiming depreciation other than additional depreciation u/s 32(1)(iia).
Benefit of lower rate under the aforesaid section can be exercised by the company from any year commencing from AY 2020-21 or onwards. Such option is to be exercised in prescribed manner, before due date of return u/s 139(1) for the year in which option is exercised. Option once exercised would be binding for subsequent years and cannot be withdrawn.
2) Companies availing benefit of lower tax rate under new provisions of sections 115BAA/ 115BAB have been Exempted from MAT on book profit under section 115JB
C) For all new manufacturing domestic companies [As per section 115BAB]
Income Tax Rate: 15% (Subject to Note 1)
Surcharge: 10% of taxable income if net income exceed 1 crore.
Health and Education Cess: 4% of Income Tax Plus Surcharge
Note:
1. Following conditions need to be satisfied for getting benefit of lower tax rate introduced by Section 115BAB:
a) If such company is set-up and registered, on or after 1st October,2019 and commences manufacturing activity upto 31st March, 2023.
b) Akin to the provisions of section 115BAA, income for the purposes of the aforesaid preferential rate has to be computed without claiming exemptions / deductions, set-off of brought forward losses, as prescribed in that section and discussed above.
c) Additionally, following conditions must be fulfilled by the company to avail benefit of lower tax rate:
-
- company must not be formed by splitting up, or the reconstruction of a business already in existence;
- company must not use machinery or plant previously used for any purpose. Used plant and machinery to the extent of 20% of total value of plant and machinery is permissible;
- company must not use building previously used as a hotel or a convention Centre.
d) Akin to provisions of section 115BAA, if company opts for lower rate of tax given under this section, it shall not be able to subsequently withdraw the option.
2. Companies availing benefit of lower tax rate under new provisions of sections 115BAA/ 115BAB have been Exempted from MAT on book profit under section 115JB
III) Meaning and Calculation of Book profit (Section 115JB)
As per Explanation 1 to Section 115JB(2) “book profit” for the purposes of Section 115JB means net profit as shown in the statement of profit and loss prepared in accordance with Schedule III to the Companies Act, 2013 as increased and decreased by certain items prescribed in this regard. The items to be increased and decreased are as follows:
(A) Amount to be Added Back if Debited to Profit and Loss Account:
1. Income-tax paid or payable and the provisions Income-tax including education cess, interest, dividend distribution tax (DDT) under the Income-tax Act, 1961.
2. Amounts carried to any reserves, by whatever name called
3. Amount or amounts set aside to provisions made for meeting liabilities, other than ascertained liabilities
4. Amount by way of provision for losses of subsidiary companies
5. Amount or amounts of dividends paid or proposed
6. Amount or amounts of expenditure relatable to any income to which section 10 (other than the provisions contained in clause (38) thereof) or section 11 or section 12 apply
7. Amount of Depreciation debited to Profit & Loss A/C
8. Amount of deferred tax and the provisions therefor and the amount or amounts set aside as provision for diminution in the value of any asset.
9. Amount standing in revaluation reserve relating to revalued asset on the retirement or disposal of such asset
10. Amount of income/loss in the case of units referred to in Section 47(xvii)
(B) Amount to be Deducted from Net Profit:
1. Amount withdrawn from reserves or provisions, if any such amount is credited to the profit and loss account.
2. Income exempt from tax :
The following income, if credited to profit and loss account, shall be deducted—
3. long-term capital gain exempt under Section 10(38);
4. income exempt under other clauses of Section 10;
5. income exempt under Sections 11 and 12;
6. share of profit from an AOP on which no income-tax is payable in accordance with the provisions of Section 86 (applicable from the assessment year 2016-17);
7. (in the case of a foreign company) interest, royalty or technical fees chargeable to tax under Sections 115A to 115BBE, or capital gain arising on transactions in securities, if income-tax payable in respect of these incomes under normal provisions (other than provisions governing MAT) is less than the rate of MAT (applicable from the assessment year 2016-17); and
8. Royalty in respect of patent chargeable to tax under Section 115BBF.
9. Depreciation (other than because of revaluation of assets) debited to profit and loss account (applicable from the assessment year 2007-08 onwards)
10. Amount withdrawn from revaluation reserve credited to profit and loss account to the extent it does not exceed the amount of depreciation on account of revaluation of assets [applicable from the assessment year 2007-08].
11. Aggregate amount of unabsorbed depreciation and loss brought forward in case of a company against whom an application for corporate insolvency resolution process has been admitted by the Adjudicating Authority under Section 7/9/10 of the Insolvency and Bankruptcy Code (applicable from the assessment year 2018-19)
12. Amount of loss (before depreciation) brought forward or unabsorbed depreciation, whichever is less, as per books of account [not being a company which is covered by Item 12A (supra)]
13. Amount of profit eligible for deduction under Sections 80HHC, 80HHE and 80HHF
14. Profit of sick industrial unit
15. The amount of deferred tax, if any such amount is credited to the profit and loss account.
16. Amount of income/loss in the case of units referred to in Section 47(xvii)
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