Things to keep in mind before shifting to 22% tax rate u/s 115BAA of the Income tax act:

written by Income tax Expert | November 30, 2019

An ordinance was passed by our Finance Minister on the 20th September 2019, where she announced two new corporate tax rates i.e. 22% and 15% and the step was taken so as to lower tax rate and to encourage the industry and in turn encourage our economy.

However along with introducing these two new tax rates there were few conditions connected with these tax rates which you need to keep in mind before you select it while filing your income tax return. You can read about section 115BAA in detail in our earlier post: Section 115BAA – 22% Tax on non-manufacturing Companies, but in this post we are going to discuss things you need to keep in mind before selecting the new tax rate:

 

  1. You cannot claim deduction from total income u/s 10AA (i.e. deduction to SEZ), additional depreciation u/s 32(1)(iia), u/s 32AD additional deduction, u/s 33AB, u/s 33ABA or deduction for scientific research u/s 35, u/s 35AD, u/s 35CCC, u/s 35CCD or any deduction under heading C of Chapter VI – A i.e. 80-IA to 80RRB except 80JJAA e. a company claiming lower tax rate can take benefit of section 80JJAA.
  2. The existing company also cannot carry forward any loss which is attributable to any of the above sections.
  3. Another condition is that one needs to select this option before the due date of filing return of income u/s 139 and once this option has been selected one cannot withdraw the same subsequently.

 

Further a clarification was made by CBDT vide circular 29/2019 Dt. 02/10/2019 relating to section 115BAA wherein it said that:

MAT u/s 115JB won’t be applicable for companies who exercise their option to pay tax under this section. Also, company won’t be allowed to carry forward/ claim additional depreciation.

Therefore board themselves advised to the people that they can/ should exercise the option to pay tax under the new regime once they set off the entire additional depreciation or entire MAT credit.

You can download the circular from here: 29/2019

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