Corporate rate slashed to 22% w.e.f. FY 2019-20

[gvenugopal g]

Dear Experts, Good Morning!!

The Government has brought in the Taxation Laws (Amendment) Ordinance 2019 to make certain amendments in the Income-tax Act 1961 and the Finance (No. 2) Act 2019 and announced in the recent budget too.

In order to promote growth and investment, a new provision u/s.115BAA has been inserted in the Income-tax Act with effect from FY 2019-20 which allows any domestic company an option to pay income-tax at the rate of 22% subject to condition that they will not avail any exemption/incentive. The effective tax rate for these companies shall be 25.17% inclusive of surcharge & cess. Also, such companies shall not be required to pay Minimum Alternate Tax.

Kindly clarify whether a existing 30% tax paying Corporate can avail the above concessional rate without claiming tax exemptions/deductions i.e. [(Sec.80H to 80TT), incentives (sec.32AC, 32AD), exemptions (Sec-10A, 10AA), additional depreciation u/s.32(1)(iia) and un-absorbed losses, set-off of carried forward losses if any]?

AI Summary

New Tax Ordinance: Domestic Companies Can Opt for 22% Rate Under Section 115BAA, Exempt from MAT, No Exemptions Allowed. The government introduced the Taxation Laws (Amendment) Ordinance 2019, amending the Income-tax Act 1961 and Finance (No. 2) Act 2019, to promote growth and investment. A new provision, Section 115BAA, allows domestic companies to opt for a 22% income tax rate effective from FY 2019-20, with an effective rate of 25.17% including surcharge and cess, provided they forgo exemptions and incentives. Companies choosing this rate are exempt from Minimum Alternate Tax. A query was raised about whether a company currently paying 30% tax can switch to this rate without claiming exemptions or deductions, to which the response was negative.