Article contains Income Tax rate for domestic companies for Assessment Year 2020-21 , Conditions to opt section 115BAA of Income Tax Act, 1961, Conditions to opt section 115BAB of Income Tax Act, 1961, When 115BAB of Income Tax Act, 1961 shall not be allowed and Other amendments related to Corporate tax Rate for AY 2020-21.

1. Income Tax rate for domestic companies for Assessment Year 2020-21

Nature of Company Base Rate Surcharge EC Total Effective Rate MAT Effecti-ve MAT Rate Remark
Opted 115BA

[Manufacturing from 01.03.2016]

25 0-1cr =0

>1Cr =7

>10Cr=12

4 26

27.82

29.12

15 15.6

16.692

17.472

Company under this section can opt 115BAA but not 115BAB
Opted 115BAA

[AY 2020-21] Old+New

22 10 4 25.168 NA NA Any company opt this section upon incentive forgone
Opted 115BAB

[New Manufacturing from 01.10.2019]

15 10 4 17.16 NA NA New company + New Plant & Machinery + incentive forgone
Any Company

[T <=400cr for FY 2018-19]

25 0-1cr =0

>1Cr =7

>10Cr=12

4 26

27.82

29.12

15 15.6

16.692

17.472

May continue if co having accumulated losses / Mat Credit
Any Company

[T >400cr for FY 2018-19]

30 0-1cr =0

>1Cr =7

>10Cr=12

4 31.20

33.38434.944

15 15.6

16.692

17.472

May continue if co having accumulated losses / Mat Credit

2. Conditions to opt section 115BAA

  • The total income of the company has been computed without claiming specified deduction, exemption or incentives and without setting off any b/f losses or additional depreciation;
  • The option to avail of the benefit of section 115BAA must be exercised on or before the due date specified under Section 139(1) for furnishing of first return of income in the prescribed manner. This option once exercised cannot be withdrawn subsequently;

Further, via circular No. 29/2019 dtd 02.10.2019, it is clarified that:

  • There is no time limit to exercise option u/s 115BAA for the benefit of lower tax rate;
  • After exercising option u/s 115BAA the domestic company shall not be allowed to claim set off of any brought forward loss on account of additional depreciation [u/s 32(1)(iia)] for an assessment year for which the option has been exercised and for any subsequent assessment years. Therefore, accumulated losses on account of additional depreciation would become dead losses;
  • Further, after exercising option u/s 115BAA the domestic company shall also not be allowed to claim brought forward MAT Credit for an assessment year for which the option has been exercised and for any subsequent assessment years.

Taxes word cloud

3. Conditions to opt section 115BAB

  • The domestic company should be incorporated on or after 01-10-2019;
  • It should commence the manufacturing on or after 01-10-2019 but before 31-03-2023;
  • It must be engaged in the business of manufacture or production of any article or thing and research in relation to, or distribution of, such article or thing manufactured or produced by it;
  • Income which has neither been derived from nor is incidental to manufacturing or production of an article or things and no specific rate of tax has been provided shall be taxed at 22%;
  • Short Term Capital Gain on transfer of capital assets shall also be taxed at 22%;
  • Income determined by the AO having associated relation, shall be taxed at 30%;
  • The option to avail of the benefit of section 115BAB must be exercised on or before the due date specified under Section 139(1) for furnishing of first return of income in the prescribed manner. This option once exercised cannot be withdrawn subsequently;
  • It must not be formed by splitting up or reconstruction of an existing business. However, this condition is not applicable in case of an undertaking formed as a result of re-establishment, reconstruction or revival in accordance with the provisions of section 33B;
  • It does not use any building which was previously used as a hotel or a convention centre;
  • It does not use any machinery or plant previously used for any purpose. Any plant or machinery which was used outside India shall not be treated as used for any other purpose, if following conditions are satisfied:
  • Before the date of installation, they were not used in India;
  • These assets were imported into India; and
  • No deduction on account of depreciation has been allowed or allowable to any person on such plant and machinery before they were installed by the assessee
  • However, this condition shall be deemed to have been complied with if value of plant and machinery previously used does not exceed 20% of total value of plant and machinery;
  • The total income of the company has been computed without claiming specified deduction, exemption or incentives (table discussed below).

4. When 115BAB shall not be allowed

The following businesses have been excluded from the scope of section 115BAB:

> Development of computer software in any form or in any media;

> Mining;

> Conversion of marble blocks or similar items into slabs;

> Bottling of gas into cylinder;

> Printing of books or production of cinematograph film;

> Any other business as may be notified by the Central Govt.

Foreign company

Nature of Company Base Rate Surcharge EC Total Effective Rate MAT Effective MAT Rate Remark
Any Foreign Company 40 0-1cr =0

>1Cr =2

>10Cr=5

4 41.600

42.432

43.680

15 15.6

15.912

16.38

5. Other amendments

  • Section 92BA amended to consider the specified domestic transaction between person opted section 115BAB having close connection/arrangement with other person to increase profit.
  • Section 115QA amended to provide exemption for tax on buy back where public announcement has been made on or before 5th July,2019.

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