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Conditions to opt for lower income tax rate @22% u/s 115BAA

Brijesh Pandey 
on 05 October 2019

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Recently the government announced a reduced rate of tax @22% (plus applicable surcharge and cess), for all corporations and firms provided they will not avail any exemption/Concessions/Tax Holidays as enjoying presently. As it is an option to the corporations and not mandate, taxpayers can continue with the existing rate of tax with availment of existing tax incentives as earlier. 

Conditions to opt for lower income tax rate  22  u/s 115BAA

However, who will opt for such concessional or reduced rate of tax, they have to adhere with the conditions specified in Sec. 115BAA i.e. such companies should not avail any exemptions/incentives under different provisions of income tax. Therefore, the total income of such company shall be computed without:

 
  1. Claiming any deduction especially available for units established in special economic zones under section 10AA.
  2. Claiming additional depreciation under section 32 and investment allowance under section 32AD towards new plant and machinery made in notified backward areas in the states of Andhra Pradesh, Bihar, Telangana, and West Bengal.
  3. Claiming deduction under section 33AB for tea, coffee and rubber manufacturing companies.
  4. Claiming deduction towards deposits made towards site restoration fund under section 33ABA by companies engaged in extraction or production of petroleum or natural gas or both in India.
  5. Claiming a deduction for expenditure made for scientific research under section 35.
  6. Claiming a deduction for the capital expenditure incurred by any specified business under section 35AD.
  7. Claiming a deduction for the expenditure incurred on an agriculture extension project under section 35CCC or on skill development project under section 35CCD.
  8. Claiming deduction under chapter VI-A in respect to certain incomes, which are allowed under section 80IA, 80IAB, 80IAC, 80IB and so on, except deduction under section 80JJAA.
  9. Claiming a set-off of any loss carried forward from earlier years, if such losses were incurred in respect of the aforementioned deductions.
  10. Claiming a deduction for depreciation under section 32, except the additional depreciation as mentioned above.
  11. Claiming of MAT credit u/s 115 JB. 

Advice on tax planning:

 

As it is an option and there is no timeline to opt for such lower tax rates, companies can choose to exhaust all the brought forward balances first and then opt for such reduced corporate tax rates.


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