Section 115BAA

Section 115BAA of the Income Tax Act, 1961 provides a concessional tax rate for domestic companies. Domestic companies can opt to pay tax at a rate of 22%, along with a surcharge of 10% and a cess of 4%. This implies that these companies can choose to not pay the minimum alternate tax in case they decide to pay the tax under this section. This tax rate came into effect from the financial year 2019-2020.

To be eligible for the concessional tax rate under Section 115BAA, a domestic company must satisfy the following conditions:

• The company must be incorporated in India.

• The company must not be a subsidiary of a foreign company.

• The company must not have more than 25% of its turnover from any single business vertical.

• The company must not have claimed any deduction or exemption under any other provision of the Income Tax Act, 1961, which would have resulted in a lower tax liability.

If a domestic company satisfies all of the above conditions, it can opt to pay tax at the concessional rate of 22% by filing Form 10-IC. The option to pay tax at the concessional rate can be exercised for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020.

Once a company has exercised the option to pay tax at the concessional rate, it cannot withdraw the option for the current and the subsequent assessment years.

The concessional tax rate under Section 115BAA is a significant benefit for domestic companies. It can help companies to save significant amounts of tax, which can be used for investment and growth.