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    TDCAN requirement modernisation centralises TAN/PAN linkage and reporting, tightening compliance and correction procedures.
    Clause 397 requires persons deducting or collecting tax to apply for and, once allotted, quote a Tax Deduction and Collection Account Number (TDCAN) in all prescribed documents; it consolidates deduction and collection numbers, sets out statutory carve-outs and government-notified exemptions, integrates PAN linkage and consequences for non-furnishing, and centralises payment, reporting and correction mechanisms including procedures for non-resident payments and government offices.
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    Non-exclusivity of source-based tax collection allows authorities to pursue additional recovery methods when payments are provisional.
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    TDS/TCS compliance: expanded reporting and verified statement obligations, including cross-border and below-threshold payment reporting.
    Clause 397(3) requires persons responsible for deduction or collection of tax, and certain employers, to pay amounts to the credit of the Central Government within prescribed time and to submit verified statements in prescribed form and manner; it mandates reporting of payments to non-residents whether or not chargeable, requires special statements for government payments without challans, permits correction statements within six years, obliges reporting of below-threshold interest payments by specified entities, and makes collectors who fail to collect liable to pay the tax.
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    Tax deducted is income received: gross receipts included for tax computation with credit for foreign withholding.
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    TDS nil-declaration prevents withholding when estimated total income is below taxable threshold, subject to prescribed declaration and reporting.
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    Clause 395(1) creates a mechanism for Lower Deduction Certificates allowing taxpayers to apply for lower or nil deduction of tax at source; the Assessing Officer must issue a certificate when satisfied on objective material, the deductor must apply the specified rate until the certificate's validity, and procedural details, scope, validity periods and ancillary measures are to be provided by rules.
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    TDS on securities income: clarified withholding rules, treaty relief mechanics, and exemptions for capital gains and exempt fund receipts.
    Clause 393 establishes a tabular TDS regime on income from securities, distinguishing taxable securities income from capital gains and exempt receipts. Clause 393(2) prescribes withholding entries for Foreign Institutional Investors with rates referenced to an interpretative note and a 10% rate for specified funds, subject to documentation for treaty benefits. Clause 393(4) consolidates exemptions by excluding capital gains payable to foreign investors and exempt income of specified funds from TDS, aiming to avoid unnecessary withholding and refund procedures.
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    Tax Deduction at Source clarifies withholding obligations on cross border bond and GDR payments to non residents, including DTAA interaction.
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    TDS on offshore fund income and capital gains: withholding at credit or payment, with higher exit withholding and treaty considerations.
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    TDS exemption for specified public entities prevents withholding on interest, dividends and other income, simplifying payer compliance.
    Clause 393(5) provides an overriding TDS exemption for payments to the Government, the Reserve Bank of India, statutorily tax exempt corporations established by or under a Central Act, and mutual funds specified in Schedule VII, covering interest, dividends (in respect of securities or shares owned by or in which they have full beneficial interest) and any other income accruing or arising to them, with the non obstante language ensuring the exemption prevails over other withholding obligations.
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    Grossing-up requirement preserves tax base where payer bears recipient's tax liability, altering TDS computation and compliance.
    Clause 393(10) mandates a grossing-up requirement where the payer bears the recipient's tax: taxable income must be increased so that, after deduction of tax at the rates provided in the Chapter (including applicable surcharge and cess), the net amount equals the contractual payment. The clause applies to TDS payments under the Chapter except specified salary cases, covers residents and non residents, and requires use of the applicable DTAA rate when beneficial. Key practical issues include computation of add ons, allocation across composite payments, currency fluctuation effects, and contract drafting to evidence net of tax obligations.
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    TDS on payments to non-residents: a table-based framework modernizes withholding obligations and aligns rates with treaty benefits.
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    TDS on partner payments: mandatory withholding on specified firm-to-partner payments with prescribed threshold and compliance duties.
    Mandatory withholding applies to sums in the nature of salary, remuneration, commission, bonus or interest paid or credited (including to the capital account) by a firm to a partner, deductible at ten per cent at the earlier of credit or payment, with a per-partner annual threshold exemption and declaration-based non-deduction mechanisms; the firm bears the deduction obligation and normal TDS procedures apply.
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    TDS on virtual digital assets imposes withholding obligations with targeted exemptions for small-value and small-taxpayer transfers.
    The Bill requires withholding on any benefit or perquisite arising from business or profession whether cash or non-cash, obliges the provider to deduct tax and, if consideration is wholly or partly in kind with insufficient cash, to ensure tax payment before release. A parallel VDA withholding regime mandates deduction on transfers of virtual digital assets with specified exemptions for small-value transactions and small taxpayers, similar safeguards for non-cash consideration, and procedural rules addressing timing, aggregation and crediting for compliance.
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    TDS on non-monetary benefits: providers must withhold tax on in-kind and indirect business advantages, affecting compliance and valuation.
    Clause 393(1)[Table: S.No. 8(iv)] and section 194R require the provider of any benefit or perquisite arising from business or profession to deduct tax at source on the value or aggregate value of such benefits, covering cash and non-cash advantages, with specified thresholds and exemptions for smaller providers; the Bill consolidates this obligation, clarifies anti-overlap treatment with other TDS provisions, links timing of deduction to credit or payment, and preserves reliance on administrative guidance for valuation and operational issues.

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      Comparison of Section 199 "Tax on income of certain manufacturing domestic companies." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

      4 September, 2025

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      Section 199 Tax on income of certain manufacturing domestic companies.

      Income-tax Act, 2025

      At a Glance

      This document is Clause 199 of the Income Tax Bill, 2025 - (Old Version), which proposes a concessional 25% tax rate for certain domestic manufacturing companies subject to specified conditions. It matters to domestic companies engaged in manufacture or production (and related research/distribution) that were set up on or after 1 March 2016, and to the tax administration in determining eligibility and compliance. The document does not state an explicit effective date beyond the reference to "tax year" or enactment; no decision date is provided in the text.

      Background & Scope

      Statutory hooks: Clause 199 is placed within the "New tax regime" part of the Income Tax Bill, 2025. It operates "Irrespective of anything contained in this Act, but subject to the provisions of Parts A, B and this Part other than sections 200 and 201," thereby creating a standalone concessional regime subject to limited interplay with other Parts and sections. The provision applies to "a person, being a domestic company," and allows computation of income-tax at a flat rate of 25% at the option of the company, subject to enumerated conditions. Definitions or further explanations (such as definition of "manufacture" or "domestic company") are not stated in the document.

      Statutory Provision Mode

      Text & Scope

      Clause 199(1) authorises, by company option, computation of income-tax at 25% for a domestic company for any tax year, subject to three key conditions:

      • Condition (a): The company must have been set up and registered on or after 1st March, 2016.
      • Condition (b): The company must be engaged solely in the business of manufacture or production of any article or thing, and research in relation to, or distribution of, such article or thing manufactured or produced by it. In other words, the business must be limited to manufacturing/production and related research/distribution activities.
      • Condition (c): The company's total income must be computed without certain deductions listed in sub-clause (i) and without set-off of any loss carried forward attributable to those deductions per sub-clause (ii).

      Clause 199(1)(c)(i) specifies that the computation must be without deduction under (A) sections 45(2)(c) and 47(1)(b); (B) Chapter VIII-C, other than the provisions of section 146; or (C) sections specified in section 205(1)(a) to (g). Clause 199(1)(c)(ii) bars set-off of earlier year losses that are attributable to such disallowed deductions.

      Interpretation

      The clause expresses a legislative intent to create a preferable, simplified tax rate for qualifying manufacturing companies, while preventing duplication or continuance of other specified tax benefits. The language "Irrespective of anything contained in this Act" indicates a non-obstante clause intended to give the concessional rate primacy over other general provisions, but the carve-out "subject to the provisions of Parts A, B and this Part other than sections 200 and 201" indicates preserved interaction with certain Parts and specified sections. The option-based framework (see sub-sections (3) and (4)) suggests a taxpayer election that, once made, binds the company to the regime unless a separate option u/s 200 is exercised.

      Exceptions/Provisos

      Not stated in the document: any express exemptions other than the listed exclusions from deduction. The clause contains implicit carve-outs:

      • Chapter VIII-C benefits are excluded except for section 146 (i.e., section 146 remains available, while other provisions in Chapter VIII-C are not). The document does not elaborate on the content of Chapter VIII-C or on the policy reasons for preserving section 146 only.
      • Sections specified in section 205(1)(a) to (g) are also excluded; the content of those sections is not reproduced in the clause.
      • Losses attributable to the disallowed deductions are barred from set-off; subsection (2) deems such losses to have been given full effect to, preventing future deduction-this is an absolute prohibition with no stated time limitation.

      Illustrations

      • Example 1: A domestic manufacturing company incorporated on 1 April 2017, carrying on only manufacture and distribution of its products, opts into Clause 199. It cannot claim tax deductions under Chapter VIII-C (except section 146), nor can it claim deductions u/ss 45(2)(c) or 47(1)(b). If it has earlier year losses attributable to those disallowed deductions, such losses cannot be set off in the option regime. (All specifics about amounts, calculation mechanics, and interplay with other sections are Not stated in the document.)
      • Example 2: A domestic company set up on 1 February 2016 would be ineligible because incorporation predates 1 March 2016. (The document does not state any transitional provisions.)

      Interplay

      The clause expressly limits interaction with Parts A and B and "this Part" (i.e., the Part containing the clause), excluding sections 200 and 201. It excludes Chapter VIII-C benefits (except section 146) and the listed sections in section 205(1)(a)-(g). The clause calls for an option exercised "in the manner as prescribed" with a reference point to the due date specified u/s 263(1) for filing the first return; thus, it anticipates additional procedural rules to be prescribed. Specific interaction with other Rules, Notifications, or Circulars is Not stated in the document.

      Practical Implications

      • Compliance and risk areas grounded in the document: Companies seeking the 25% rate must ensure eligibility-date of registration (on/after 1 March 2016), exclusive engagement in manufacture/production with related research/distribution, and careful computation of total income excluding specified deductions. Non-compliance with these conditions would jeopardise entitlement to the concessional rate. The clause's election mechanism, including timing linked to section 263(1), creates a procedural compliance risk if the option is not validly exercised.
      • Record-keeping/evidence points suggested by the text: Companies should maintain incorporation/registration records to evidence the registration date; detailed books and documents to demonstrate the nature of activities (manufacture/production, research, distribution) and to segregate income/expenses attributable to other businesses, if any; and documentation linking prior-year losses to specific deductions listed in Clause 199(1)(c)(i) to determine whether losses are barred from set-off.

      Key Takeaways

      • Clause 199 offers an elective flat 25% tax rate for qualifying domestic manufacturing companies incorporated on or after 1 March 2016.
      • Eligibility requires exclusive engagement in manufacture/production and related research/distribution; other business activities disqualify a company under the clause.
      • Certain deductions are expressly disallowed for companies opting into the regime-specifically sections 45(2)(c) and 47(1)(b), most of Chapter VIII-C (except section 146), and sections referred to in section 205(1)(a)-(g).
      • Losses carried forward attributable to those disallowed deductions cannot be set off; subsection (2) deems such losses to have been given full effect to.
      • The concessional rate is elective, requires prescribed procedural exercise by the due date u/s 263(1) for furnishing the first return, and once made, is binding unless section 200 is invoked; the document contains no detail on the prescribed manner.
      • The clause contains a non-obstante opening but preserves certain Parts/sections, indicating limited interplay rather than complete override of the Act.
      • Operational details (definitions, examples, prescribed forms/procedures, transitional rules, or effective date specifics) are Not stated in the document.

      Differences Between Documents and Practical Impact

      TopicEarlier Position (Clause 199 - Bill Old Version)Later Position (Section 199 - Act)
      Parts referenced as subject to"subject to the provisions of Parts A, B and this Part other than sections 200 and 201""subject to the provisions of Parts A, B, E and this Part (other than sections 200 and 201) of this Chapter"
      Reference to section 45(2)Disallowance references "sections 45(2)(c) and 47(1)(b)"Disallowance references "section 45(2) or 47(1)(b)"
      Prescription wording for exercise of option"in the manner as prescribed""in the manner as may be prescribed"
      Typographical/clerical varianceSub-section (4) references "section section 200" (duplication)Sub-section (4) references "section 200" (single)

      Practical impact of each change:

      • Inclusion of Part E in the Act's version (Section 199) expands the set of statutory provisions that the new regime is "subject to." This broadens potential interactions and conditions that survive the non-obstante clause; companies and practitioners would need to consider Part E compliance where relevant. The Bill version omitting Part E would have left such interactions narrower. (Specific contents of Part E and practical consequences are Not stated in the document.)
      • The Bill's specific reference to section 45(2)(c) narrows the disallowance to a particular sub-paragraph of section 45(2), whereas the enacted Section 199's reference to section 45(2) more broadly excludes deductions under the whole of section 45(2). The broader reference in the Act can widen the range of deductions that are incompatible with the concessional regime, increasing the number of prior benefits/losses that may be denied. This is a substantive change affecting eligibility and post-election tax position.
      • The change from "in the manner as prescribed" to "in the manner as may be prescribed" is modest; the latter is a more conventional legislative drafting phrase indicating prescription power. It likely has no material effect beyond standardising drafting.
      • Correction of a typographical duplication ("section section 200") clarifies the cross-reference; it has no substantive legal effect beyond removing ambiguity.

      Full Text:

      Section 199 Tax on income of certain manufacturing domestic companies.

      Topics

      ActsIncome Tax