On September 20, 2019 Government of India on its Gazette Published an The Taxation Laws (Amendment) Ordinance 2019 to amend and add few sections in Income Tax Act 1961 which is expected to give a very necessary First Aid to otherwise bruised economy.
i. Section 115 BAA
Government (Income Tax Act) gives an “option” to domestic company to pay tax at the rate of 22 percent plus cess and surcharge where applicable subject to some conditions.
Here Domestic company includes all the companies which are either in manufacturing or Service Industry.
This is not compulsory as the company availing this will have to forego various deductions and exemptions such as under Section 10AA tax benefit to SEZ units for first 10 years, Extra depreciation under section 32(1) (iia), Deduction for Scientific Research under section 35 and many more.
Although section is presented as option, but this becomes compulsory for all other coming years once exercised and the option can be exercised on or before due date of filing return under Section 139(1) in prescribed manner.
ii. Section 115BAB
Unlike section 115BAA the benefit of this section is only available to Domestic Company which are setup and registered on and after the 1st day of oct 2019 and has commenced manufacturing on or before 31st day of March 2023.
This section trying to boost the newer manufacturing companies and the ordinance has made sure that the newly established company is not “just” established to avail the benefit. As this section does not apply if the company is formed by splitting up or reconstructing the existing business.
And also, the company wanting to avail the benefit of this section are required to use at least 80 percent new plant and machinery (or previously not put to use in India) of total plant and machinery. Hence the plant and machinery used for manufacturing are either new or if used then not used in India and no deduction of depreciation is allowed or allowable under the provision the act any period prior the installation of such plant and machinery.
By amending sec 92BA the government has made an arrangement to make sure that no existing company tries involve in specified domestic transaction with these new companies then Assessing Officer has given right to compute profit on such transaction on Arm Length Price Defined Under section 92F(ii).
i. Section 115JB: MAT Provisions
There has been given a major benefit to the companies availing benefit of section 115BAA and 115BAB as this section is made non applicable to them by inserting the second clause to subsection 5A.
And the rate of Minimum Alternate Tax which was to be calculated under section 115JB has been reduced to 15 percent from existing 18.5 percentage.
As 115JB is only applicable to corporate the non-corporates will have to pay alternate minimum tax of 18.5 percent under section 115JC.
ii. Section 115QA : Buy Back of Shares.
The government has provided a new sun rise date for applicability of this section. The section shall be applicable only to the public announcement to the buyback of share made after 5th of July 2019.
PS: please let me know if i missed something.