Detailed analysis of Section 115BAA & Section 115BAB

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Shorya Bansal

Two new sections (Section 115BAA and Section 115BAB) were introduced reducing the
corporate tax rate for domestic companies to 22% and for domestic companies indulged
in manufacturing activities to 15%. Taxation and other Laws (Relaxation of
Certain Provisions) Ordinance, 2020 has also fixed the rate of surcharge to 10%
irrespective of the profits earned by the company.

Detailed analysis of Sec 115BAA:-

Applicable tax rate – 22%

Rate of surcharge – 10%
Applicable on domestic companies
The companies can opt of the above tax regime for any previous year relevant to
the assessment year beginning
on or after the 1st day of April, 2020, and should be applicable for all subsequent
assessment years, subject to
some conditions.
The total income of the company shall be computed –
Without any deduction under sec 10AA, 32(1)(iia), 32AD, 33AB, 33ABA,
35AD, 35CCC, 35CCD or, under
any provisions of Chapter VI-A under the heading “C.—Deductions in respect
of certain incomes” other
than the provisions of section 80JJAA
without set off of any loss carried forward or depreciation from any earlier
assessment year, if such loss
or depreciation is attributable to any of the deductions referred above.
without set off of any loss or allowance for unabsorbed depreciation deemed so
under section 72A, if
such loss or depreciation is attributable to any of the deductions referred
above.

Detailed analysis of Sec 115BAB:-

Applicable tax rate – 15%

Rate of surcharge – 10%
Applicable on domestic companies engaged in manufacturing activities or incidental
activities.
The companies can opt of the above tax regime for any previous year relevant to the
assessment year beginning

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 on or after the 1st day of April, 2020, and should be applicable for all subsequent
assessment years, subject to some conditions.
Any income earned by the company which is not incidental to manufacturing of
products shall be taxed at the
rate of 22% and no deduction of expenses shall be allowed in computing such
income.
Tax on short term capital gain on sale of assets shall be computed at 22%
Following conditions shall be fulfilled for opting in this regime.
The company shall be registered on or after 1.10.2019 but before 31.03.2023.
The business should not be formed by splitting up, or the reconstruction, of a
business already in existence.
The business does not use any machinery or part of machinery previously
used, however any machinery or part previously used outside India shall not
be regarded as previously used.
The business of manufacturing of products shall not include-
Development of computer software
Mining
Bottling of gas into cylinders
Printing of books
Production of cinematograph films
The total income of the business shall be computed –
Without any deduction under sec 10AA, 32(1)(iia), 32AD, 33AB, 33ABA,
35AD, 35CCC, 35CCD or,
under any provisions of Chapter VI-A under the heading “C.—
Deductions in respect of certain
incomes” other than the provisions of section 80JJAA
without set-off of any loss or allowance for unabsorbed depreciation
deemed so under section
72A where such loss or depreciation is attributable to any of the
deductions referred above

Other Details relevant for both the inserted sections:-

Provisions of MAT under section 115JB shall not be applied on companies opting for
new regime.
It has been clarified by CBDT through issue of a circular that the MAT credit
outstanding in the Balance sheet
shall be lapsed on exercise of such option.

How companies can opt for this new regime:-

Companies can opt in this new regime by filing the relevant forms using their e-
filing portal
The relevant forms are –
FORM 10-IC for sec 115BAA
FORM 10-ID for sec115BAB

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If companies does not satisfy the conditions during any relevant previous year they will be
shifted to the old regime and income tax shall be charged as if they have not opted for the
new regime.

Annexure-A defining various sections used in the report

Sec 10AA – Provisions for newly established units in SEZ

Sec 32(1)(iia) – Provision for additional depreciation

Sec 32AD – Investment in new plant and machinery in certain backward areas

Sec 33AB – Deposition of amount with respect to scheme framed by Tea board, coffee
board or rubber board

Sec 33ABA – Site restoration fund

Sec 35AD – Deduction in respect of specified business

Sec 35CCC – Expenditure on agricultural extension project

Sec 35CCD – Expenditure on skill development project

Sec 72A – Provisions relating to carry forward and set off of accumulated loss and
depreciation allowance in amalgamation or demerger.

Sec 80JJAA – Deduction in respect of employment of new employees

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