With the ordinance passed on the 20th September  2019 the new taxation rates were introduced for the manufacturing companies.  In the current situation of Indian Economy slowdown this step has been welcomed at the existing and budding entrepreneurs at large. According to the notification released now 22% tax will be levied on the domestic companies and 15% will be applicable for new manufacturing companies.  The main aim behind this move is to boost the falling Indian Economy. However there are certain condition that needs to be fulfilled by company to get this benefit of low tax rate. With this article we will be discussing the conditions to be satisfied for claiming the lower tax rates.

The benefits of section 115BAB i.e. the reduced tax rates can be claimed by the domestic companies registered in India. This benefit will be available for them for the financial year 2019-2020. Here are the conditions that needs to be satisfied –

  1. The date of incorporation of the company is on or prior to 1st October 2019 and it has commenced its concerned manufacturing activity on or before 31 march 2023.
  2. Such company is not formed as result of reconstruction of the existing business with the exception of the business re established under section 33B.
  3. The company shall not use the previously used plant and machinery or the building previously used as the hotel or the convention center. However, if the plant and machinery was used in foreign country and now is being used in India for the first time it is not considered as already being used. Also, the old plant and machinery can be put to use if its value does not exceed 20% of the total value of plant and machinery used by company.
  4. The company shall have a business activity of manufacturing anything and carrying out research of it or the distribution of such thing.
  5. The total income of the income is calculated without considering the deductions like additional depreciation, deduction for tea, coffee manufacturer, deduction towards deposits made, deduction for scientific researches, expenditure incurred on agricultural projects and much more.

What will be total tax liability of companies Under section 115BAB?

The total tax liability of the companies under this section will be somewhere around 17.16%.

 Can any company opt for section 115BAB?

No, not every company is eligible for exercising the option of section 115BAB. Only the new manufacturing companies who have opted for the scheme on or before the due dates of filing the returns are eligible to opt for this scheme. One thing to be noted here is that once a company has opted for section 115BAB in a particular financial year, it cannot be withdrawn subsequently.

In this manner the new emerging companies can be benefitted from claiming the deduction under section 115BAB.