Section 200 (aka Section 115BAA) tax rate for companies explained

This document covers

1. Applicable Tax Rates
2. Deductions not applicable for the taxpayers
3. How to opt for Concession rate of tax
4. Non-Applicability of Section 200 (aka Section 115BAA)
5. Opting out of Section 200 (aka Section 115BAA)
6. Application of concessional rate of tax for capital gains

1. Applicable Tax Ratesu/s 200 (aka u/s 115BAA)

• The tax rate u/s 200 of IT Act 2025 (u/s 115BAA of IT Act 1961) for all domestic companies (Private or Public) is 22%.
• Surcharge of 10% and education cess of 4% is applicable on the tax rate for all domestic companies.
• The effective tax rate is 25.168%

Year of Applicability

• Section 200 (aka Section 115BAA) is applicable w.e.f AY 2020-21.
• Every domestic company which is incorporated before or after 31st Mar 2020 can opt for Section 200 (aka Section 115BAA).

Applicability of MAT Credit

Domestic Companies who are opting for concessional rate of tax @ 22% u/s 200 (aka u/s 115BAA)cannot opt for Minimum Alternate Tax Credit (MAT)

2. Deductions not applicable for the taxpayers opting Section 200 (aka Section 115BAA) i.e., tax rate @ 22%

Following deductions will not be applied to domestic companies who are opting for concessional rate of tax @ 22% u/s 200 (aka u/s 115BAA)

1. Deduction u/s 10AA (Tax holiday for units located in SEZ)
2. Deduction u/s 32AD (Investment in new Plant and Machinery in notified areas)
3. Deduction u/s 48 of IT Act 2025 (u/s 33AB of IT Act 1961) or u/s 49 of IT Act 2025 (u/s 33ABA of IT Act 1961) (For business related to cultivating and manufacturing tea, coffee, rubber or tea and prospecting, extraction or production of petroleum or natural gas in India)
4. Deductions u/s Chp VIA except 80JJAA (tax incentive for employment generation) and 80M (inter Corporate dividends)
5. Additional depreciation u/s 33(1)(iia) of IT Act 2025 (u/s 32(1)(iia) of IT Act 1961)
6. Deduction u/s 46 of IT Act 2025 (u/s 35AD of IT Act 1961), 35CCC or 35CCD
7. Deduction u/s 45(1) of IT Act 2025 (u/s 35(1) of IT Act 1961), 35(2AA), 35(2AB) (Related to Scientific research)
8. Set-off of any losses or unabsorbed depreciation from previous years if such loss is due to above deductions

3. How to opt for Concession rate of tax @ 22% u/s 200 (aka u/s 115BAA)?

• Domestic Companies required to file Form 10IC before the Income tax filing and mention the acknowledgement number and date of filing in Income Tax Return
• Form 10IC must be filed on or before the due date of Income Tax Filing
• If Form 10IC is not filed, then the companies cannot opt for 22% tax rate
• Form 10IC is not required to be submitted every year if submitted in 1 year

4. Non-Applicability of Section 200 (aka Section 115BAA) (Concessional rate of 22%)

Concessional rate of tax @ 22% is not applicable for the following

1. Foreign Companies
2. LLP/Firms
3. Individuals
4. AOP/Societies

5. Opting out of Section 200 (aka Section 115BAA)

Once the concession tax rate of 22% is opted, the companies cannot opt out of Section 200 (aka Section 115BAA) in the subsequent year

6. Application of concessional rate of tax @ 22% (Section 200 (aka Section 115BAA)) for capital gains

Section 200 (aka Section 115BAA) i.e., 22% tax rate is not applicable for capital gains . Capital Gains are taxable @ rates as per Income tax act depending on type of capital gain