The Central Board of Direct Taxes (CBDT) has notified Forms 10-IC and 10-ID vide Notification No. 10/2020 dated 12-02-2020 for existing companies that want to avail lower Income tax rate and new manufacturing firms incorporated after October 1, 2019, respectively.

The effective tax rate for existing units, after considering surcharges and cess will be 25.17 per cent as compared to 34.94 percent previously. For new units incorporated after October 1, 2019, it will be 17.01 per cent as against 29.12 per cent previously. However, with opting to lower rate of taxation, companies have to forego certain deductions and exemptions. One of the conditions is that such a company cannot claim any deduction under Chapter VI-A of the Income Tax Act, 1961 except deduction under section 80JJA and section 80M (incorporated by Finance Bill 2020).

The companies wish to avail the beneficial rate of 22 per cent under section 115BAA has to file Form 10-IC on or before due dates mentioned in sections 139(1) i.e. on or before October 31 (extended by Finance Bill 2020 from September 30). Similarly, The new domestic manufacturing companies, incorporated after October 1, 2019 wish to be taxed under concessional tax rate of 15 per cent under section 115BAB has to file Form 10-ID on or before October 31. In short, the options has to exercise before filing of return of income by October 31, 2020. However, the return of income may be filed belatedly.

The e-Form 10-IC & e-Form 10-ID, which has to be furnished either under digital signature or electronic verification code (EVC), seeks general details of the company like name, PAN, registered address, date of incorporation, date of commencement of manufacturing operations and nature of business activities.

The companies will also have to declare that the option once exercised shall not be withdrawn. Besides, these companies will have to withdraw the option to be taxed at the concessional rate of 25 per cent under the erstwhile regime.

The Income-tax rates applicable in case of companies for Assessment Year 2020-21 are as follows:

Domestic Company Applicable Rate of Tax from AY 2020-21
Where its total turnover or gross receipt during the previous year 2017-18 does not exceed Rs. 400 crore 25%
Where it opted for Section 115BA 25%
Where it opted for Section 115BAA 22%
Where it opted for Section 115BAB 15%
Any other domestic company 30%


Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but not exceeding ten crore rupees and at the rate of 12% of such tax, where total income exceeds ten crore rupees. However, the rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be 10% irrespective of amount of total income.

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

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April 2021