Section 115BA of Income Tax, 1961

Introduction to Section 115BA of the Income Tax Act, 1961:-

Section 115BA of the Income Tax Act 1961, deals with various tax rates which are applicable to manufacturing companies in India. Section 115BA is first introduced in the Finance Act, of 2016. The main purpose of Section 115BA is to reduce the burden of the corporate tax rates of various domestic companies in India that are dealing with the manufacturing process after completing certain required conditions.

Conditions required to be satisfied for claiming benefit under Section 115BA:-

Incorporation:-

The companies who want to qualify under section 115BA of the Income Tax Act, 1961 have to incorporate and to their registration on or after 1st March 2016.

Type and Place of Business:-

The benefit of Section 115BA of the Income Tax Act, 1961 is only available to the companies who are involved in the manufacturing process or any production of articles or things and located in India only. The company must be a domestic company and not a foreign company.

Formation of the Business:-

To qualify under Section 115BA of the Income Tax Act, 1961, the company should not be formed from the existing business or by splitting up from the existing business.

List of Deductions or Exemptions which can’t be availed while opting for section 115BA:-

The company if takes benefit under Section 115BA then can not claim the benefit of deductions under:

• Section 10AA: Deductions for Special Economic Zone.
• Section 32AD: An Expenditure allotted for manufacturing machinery, and new plants in backward areas like Telangana, West Bengal, and Andhra Pradesh.
• Section 32AC, Section 35(1)(ii), Section 35(iia), Section 35(iii), Section 35(2AA)/(2AB) and Section 35AC.
• Section 33AB: Deduction allotted on the manufacturing of tea, coffee, and rubber.
• Section 33ABA: Deposits given by the companies to the site restoration fund for the production and extraction of petrol and natural gas in India.
• Section 35AD: Capital allocated by any business.
• Section 35CCC: Investment made in any projects of agriculture extension.
• Section 35 CCD: Investment made in any projects of skill development.

The deduction or exemptions is allowed only in case of depreciation allowance and the deduction for any investment made under Chapter VI-A provisions(except for 80JJAA.)

Application under Form 10-IB for 115BA:-

According to CBDT regulations, Form 10-IB contains the option to apply for Section 115BA of the Income Tax Act. One can submit the form online with an EVC or digital signature. The option can be exercised by the company before the due date for filing the income tax return.

Withdrawal from Section 115BA:-

Once the company qualifies under Section 115BA can not withdraw from the same.

Meaning of Business for Section 115BA of the Income Tax Act:-

The term “business of manufacture” the following business for the purpose of Section 115BA:-

1. developing computer software in any form or media,
2. mining,
3. converting marble blocks or similar items into slabs, bottling gas into cylinders,
4. printing books or producing cinematograph films.

Additionally, the Central Government may notify any other business that is excluded from the definition of “business of manufacture.”

Applicability and Tax Rates under Section 115BA of the Income Tax Act:-

Domestic companies established on or after 1st March 2016, engaged in the manufacturing or production of any articles or things, are subject to the provisions of Section 115BA of the Income Tax Act. Section 115BA is also applicable to all those manufacturing or domestic companies whose total income does not exceed Rs. 400 Crore for the relevant previous year. Section 115BA gives a special tax rate of 22% for domestic manufacturing or production companies only if they satisfied certain conditions given under Income Tax Act.

Surcharge and Cess under Section 115BA of the Income Tax Act:-

Under Income Tax Act, of 1961 gives a special tax regime under Section 115BA for all those companies who are dealing in the business of the manufacture and production of goods. Under Section 115BA, companies can choose a lower tax rate of 25% on their total profits by completing certain conditions. When a company qualifies under Section 115BA then it is liable to:

Surcharge:-

It is an additional tax added to the price of goods or services. When the company’s income is

more than Rs. 1 Crore to Rs. 10 Crore then a 7% surcharge is applicable

more than Rs. 10 Crore then a 12% surcharge is applicable.

Cess:-

The Government charged cess for a specific purpose. Cess is used for the purpose of education and health, therefore, it is also known as ‘Health and Education Cess’. The company has to pay a cess of 4% on their tax liability after the surcharge if applicable.

Applicability of MAT (Section 115JB):-

The domestic company that has opted for taxation under section 115BA shall not be exempt from the provisions of Section 115JB i.e.Applicability of MAT.

Conclusion under Section 115BA of the Income Tax Act:-

Section 115BA gives benefits to manufacturing companies to select less tax rate of 25% on their profits rather than regular corporate tax rate after fulfilling some conditions.

 

– This article is a contribution of Ms. Samrudhi Gholap.

 

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