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

Concessional corporate tax option requires renunciation of exemptions and losses to qualify; existing high-rate companies cannot opt without foregoing benefits.
A new provision permits a concessional corporate tax option under which any domestic company may elect a reduced corporate rate only if it forgoes specified exemptions, incentives and deductions; the option alters effective tax incidence inclusive of surcharge and cess and exempts electing companies from the Minimum Alternate Tax. The expert response to whether an existing higher rate company can avail the option by simply foregoing listed benefits is negative.