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The government has introduced a favourable tax regime for new manufacturing companies. The Taxation Laws (Amendment) Ordinance, 2019 passed on 20 September 2019 has inserted Section 115BAB offering a low tax rate of 15% (plus surcharge and cess) to new manufacturing companies. This is done to promote the new manufacturing start-ups.
A domestic company satisfying the specified conditions mentioned in (2) below can claim the benefit of section 115BAB. The domestic company includes a company formed and registered in India. The benefit is available from the financial year 2019-20 (AY 2020-21).
A domestic company will be entitled to the benefit of low corporate tax rate if it satisfies the following conditions:
A new manufacturing company can exercise the option to be taxed under section 115BAB. The company has to exercise the option on or before the due date of filing income tax returns which is usually 30th September of the assessment year, unless extended. Once the company opts for section 115BAB in a particular financial year, it cannot be withdrawn subsequently.
The new effective tax rate, which will apply to domestic companies availing the benefit of 115BAB is 17.16% . The break up of such tax rate is as follows:
|Base Tax rate||Surcharge applicable||Cess||Effective Tax rate|
Such companies will not be required to pay MAT (minimum alternative tax) under section 115JB of the act.