Just a moment...

Top
Help
×

By creating an account you can:

Logo TaxTMI
Call Us / Help / Feedback

Contact Us At :

E-mail: [email protected]

Call / WhatsApp at: +91 99117 96707

For more information, Check Contact Us

FAQs :

To know Frequently Asked Questions, Check FAQs

Most Asked Video Tutorials :

For more tutorials, Check Video Tutorials

Submit Feedback/Suggestion :

Email :
Please provide your email address so we can follow up on your feedback.
Category :
Description :
Min 15 characters0/2000
Make Most of Text Search
  1. Checkout this video tutorial: How to search effectively on TaxTMI.
  2. Put words in double quotes for exact word search, eg: "income tax"
  3. Avoid noise words such as : 'and, of, the, a'
  4. Sort by Relevance to get the most relevant document.
  5. Press Enter to add multiple terms/multiple phrases, and then click on Search to Search.
  6. Text Search
  7. The system will try to fetch results that contains ALL your words.
  8. Once you add keywords, you'll see a new 'Search In' filter that makes your results even more precise.
  9. Text Search
Add to...
You have not created any category. Kindly create one to bookmark this item!
Create New Category
Hide
Title :
Description :
❮❮ Hide
Default View
Expand ❯❯
Close ✕
🔎 TMI Notes - Adv. Search
TEXT SEARCH:

Press 'Enter' to add multiple search terms. Rules for Better Search

Search In:
Main Text + AI Text
  • Main Text
  • Main Text + AI Text
  • AI Text
Law:
---- All Laws----
  • ---- All Laws----
  • Benami Property
  • Bill
  • Central Excise
  • Companies Law
  • Customs
  • DGFT
  • FEMA
  • GST
  • GST - States
  • IBC
  • Income Tax
  • Indian Laws
  • Money Laundering
  • SEBI
  • SEZ
  • Service Tax
  • VAT / Sales Tax
Types:
---- All Types ----
  • ---- All Types ----
  • Act Rules
  • Case Laws
  • Circulars
  • Manuals
  • News
  • Notifications
Sort By: ?
In Sort By 'Default', exact matches for text search are shown at the top, followed by the remaining results in their regular order.
RelevanceDefaultDate
    Determination of tax liability which no tax is payable under the provisions of the Act : Clause 190 ...
    Definition for the operation of the General Anti-Avoidance Rule (GAAR) : Clause 184 of Income Tax Bi...
    Legislative tool curbing aggressive tax planning and abusive tax avoidance Scheme : Clause 183 of th...
    Procedural Safeguards and the Scope of GAAR : Clause 183 of Income Tax Bill, 2025 Vs. Section 100 of...
    Curbing aggressive tax avoidance strategies : Clause 182 of the Income Tax Bill, 2025 Vs. Section 99...
    Continuation and refinement of the General Anti-Avoidance Rule : Clause 181 of the Income Tax Bill, ...
    Statutory backbone of India's General Anti-Avoidance Rule (GAAR) : 180 of the Income Tax Bill, 2025 ...
    "Curbing aggressive tax avoidance strategies" under the General Anti-Avoidance Rule (GAAR) : Clause ...
    Countering the tax avoidance through codification of the General Anti-Avoidance Rule (GAAR) : Clause...
    limitation on Debt interest deduction as expenses in cross-border transactions : Clause 177 of Incom...
    Comprehensive framework for dealing with transactions with any notified jurisdictional areas : Claus...
    Anti-Avoidance Provisions in Securities Transactions : Clause 175 of the Income Tax Bill, 2025 Vs. S...
    Designed provisions to counteract tax avoidance schemes involving cross-border transactions : Clause...
    Important Definition within the framework of transfer pricing and anti-avoidance measures : Clause 1...
    Statutory Reporting & Penalties for persons entering into international and specified domestic trans...
    Revamped framework of the Transfer Pricing documentation & Penalties : Clause 171 of the Income Tax ...
    Harmonizing India's Secondary Adjustment Regime in Transfer Pricing : Clause 170 of the Income Tax B...
    Streamlining APA Implementation and Transfer Pricing Compliance : Clause 169 of Income Tax Bill, 202...
    Enhancing Certainty and Compliance in Transfer Pricing through Advance Pricing Agreements : Clause 1...
    Special provisions concerning the avoidance of tax, specifically empowering to Board to make "safe h...
❯❯
MaximizeMaximizeMaximize
0 / 200
Expand Note
Add to Folder

No Folders have been created

    +

    Are you sure you want to delete "My most important" ?

    NOTE:

    Notes
    Showing Results for :
    Reset Filters
    Results Found:
    Show All SummariesHide All Summaries
    Act RulesBills
    Show AI Summary
    Determination of tax where exempt income is included: deduction at the average tax rate neutralises tax on non chargeable income.
    Clause 190 provides that where total income includes income on which no income-tax is payable, the assessee is entitled to a deduction from the tax chargeable equal to the tax computed at the average rate of income-tax on that non-taxable amount; the average rate is derived by dividing total tax by total income and applying that rate to the exempt portion to neutralise any tax attributable to non-chargeable income.
    Act RulesBills
    Show AI Summary
    General Anti Avoidance Rule expansion: new accommodating party concept widens GAAR reach and tightens tax planning scrutiny.
    Clause 184 of the Income Tax Bill, 2025 largely carries forward Section 102's wide definitions for GAAR-covering arrangement, asset, benefit, connected person, fund, party, step, and tax benefit-while introducing an accommodating party concept to capture third party facilitators, updating cross references and terminology (e.g., "tax year"), and explicitly including permanent establishments and treaty arrangements to strengthen anti avoidance coverage.
    Act RulesBills
    Show AI Summary
    General Anti-Avoidance Rule expanded to permit concurrent or substitutive application, increasing substance-over-form scrutiny.
    Clause 183 expands the statutory reach of the General Anti-Avoidance Rule (GAAR) by expressly permitting GAAR to apply "in addition to, or in lieu of" any other basis for determination of tax liability, while maintaining application "as per such guidelines and subject to such conditions, as prescribed." The clause enables authorities to apply a substance-over-form approach, allowing concurrent or exclusive use of GAAR alongside specific anti-avoidance or substantive provisions, and thereby alters the relationship between GAAR and SAARs previously left ambiguous under Section 101.
    Act RulesBills
    Show AI Summary
    General Anti Avoidance Rule: clause makes GAAR an overriding tool but conditions its use on prescribed procedural guidelines.
    Clause 183 preserves GAAR's authority to apply "in addition to, or in lieu of" other bases for tax determination, enabling recharacterisation of arrangements based on substantive economic realities. It uniquely conditions GAAR's exercise on "guidelines and...conditions, as prescribed," thereby mandating subordinate guidance to define thresholds, approval processes, taxpayer rights, documentation and timelines, with the intent of reducing arbitrariness and enhancing predictability compared with the earlier framework.
    Act RulesBills
    Show AI Summary
    General Anti-Avoidance Rule: Treat connected and accommodating parties as one, enabling look-through of corporate structures.
    Clause 182 authorises treating connected persons as one, disregarding an accommodating party, treating an accommodating party and another party as the same person, and looking through corporate structures to determine whether a tax benefit exists, thereby enabling recharacterisation of arrangements that lack commercial substance and are designed to secure tax advantages.
    Act RulesBills
    Show AI Summary
    General Anti Avoidance Rule: broad authority to recharacterise and deny tax benefits where arrangements lack commercial substance.
    Clause 181 empowers tax authorities to neutralise tax benefits from arrangements lacking commercial substance by denying benefits (including treaty benefits) and imposing a range of consequences: disregarding or recharacterising steps or whole arrangements; treating arrangements as not entered into; treating accommodating or connected parties as one; reallocating tax attributes; recharacterising residence or situs; and looking through corporate structures. Clause 181(3) authorises reclassification of equity/debt and capital/revenue character. Rule 10UA limits consequences to the impermissible part of an arrangement, providing proportionality.
    Act RulesBills
    Show AI Summary
    Commercial substance test: disregard arrangements whose economic effect differs from form, focusing on round-trips and artificial parties.
    An arrangement may be disregarded for tax purposes if it lacks commercial substance, determined by whether the overall economic effect differs materially from its formal steps; key indicators include round-trip financing, an accommodating party, offsetting elements, disguised transactions, relocations made for tax benefit, and arrangements that do not materially affect business risks or cash flows independent of tax. Certain factors-duration, taxes paid, or an exit route-are not alone sufficient to establish substance, and the Bill omits a prior explicit definition of accommodating party, potentially creating interpretive uncertainty.
    Act RulesBills
    Show AI Summary
    GAAR main purpose test targets arrangements primarily motivated by tax benefit, with procedural safeguards for invocation.
    Clause 179 defines an impermissible avoidance arrangement under GAAR as one whose main purpose is obtaining a tax benefit and which meets at least one of four tainting conditions: arm's length departure, misuse or abuse of law, lack of commercial substance, or non bona fide means; it creates a rebuttable presumption placing the burden on the taxpayer for impugned steps and is operationalized through Rule 10UB's pre reference notice, Commissioner review, and Approving Panel safeguards.
    Act RulesBills
    Show AI Summary
    General Anti-Avoidance Rule: empowers authorities to disregard abusive arrangements and recharacterise tax consequences subject to safeguards.
    Clause 178 codifies GAAR with an overriding non-obstante effect, enabling authorities to declare an arrangement an "impermissible avoidance arrangement" and determine tax consequences, applying to whole arrangements or any step or part, based on tests of commercial substance and main purpose, while procedural safeguards-notice, hearing, and an approving panel-are prescribed to temper broad remedial powers.
    Act RulesBills
    Show AI Summary
    Interest deduction limitation restricts deductible interest to a fixed EBITDA ratio with carryforward relief and specified carve-outs.
    Limitation on deductible interest in cross border related party financing restricts interest deductions where interest paid or payable by Indian entities to non resident associated enterprises is treated as excess interest, capped by a fixed ratio of the borrower's EBITDA and by interest payable to associated enterprises; disallowed amounts are carry forwardable subject to the same ratio, a deeming rule treats economically supported third party loans as associated enterprise debt, and specified carve outs apply to regulated financial entities and bona fide IFSC Finance Companies under operational rules.
    Act RulesBills
    Show AI Summary
    Transactions with non-cooperative jurisdictions: treated as international transactions, triggering transfer pricing scrutiny and denial of deductions.
    Clause 176 creates a regime for transactions with persons in notified jurisdictional areas: government notification power; deeming parties as associated enterprises and transactions as international transactions for transfer pricing; disallowance of deductions absent prescribed authorisation and documentation; deeming unexplained receipts as assessable income; and mandatory higher withholding on payments to NJA persons, with broad definitions and anticipated procedural rules similar to Rule 21AC.
    Act RulesBills
    Show AI Summary
    Anti-avoidance in securities transactions deems income to the economic owner to prevent dividend and bonus stripping abuse.
    Clause 175 establishes a deeming regime that treats dividends and interest received by an interposed holder as the income of the original economic owner where securities are transferred and subsequently reacquired, limits taxpayer liability where similar securities are acquired, apportions income for partial-year beneficial interest holders, provides exceptions if the taxpayer proves absence of avoidance, disallows losses from dividend and bonus stripping within prescribed acquisition and disposal windows, and treats disallowed bonus-related losses as cost adjustments for retained units.
    Act RulesBills
    Show AI Summary
    Deeming of income transferred to non-residents prevents tax avoidance by treating economic beneficiaries as taxable residents.
    Clause 174 applies where a transfer of assets, before or after commencement, results in income payable to a non-resident, and where the transfer alone or with associated operations confers on any person rights that give the power to enjoy that income. Such income is deemed to be that person's income for all purposes; related capital sums are treated to prevent disguise as non-taxable receipts. Exceptions exist for bona fide commercial transactions, with the taxpayer bearing the burden to satisfy the assessing authority.
    Act RulesBills
    Show AI Summary
    Arm's length price principle reaffirmed and clarified in revised transfer pricing definitions, with expanded enterprise and transaction scope.
    Clause 173 of the Income Tax Bill, 2025 restates and refines transfer pricing definitions: arm's length price as the benchmark between independent parties in uncontrolled conditions; an expansive definition of "enterprise" covering goods, IP, services, contracts, investments and securities (directly or via units/subsidiaries); "permanent establishment" as a fixed place of business; and "transaction" to include informal or non enforceable arrangements. The clause updates the "specified date" cross reference to the Bill's return filing provision and adopts more itemised drafting while maintaining substantive continuity with Section 92F.
    Act RulesBills
    Show AI Summary
    Accountant's report requirement: certified transfer pricing reporting mandated for international and specified domestic transactions, with prescribed form and timing.
    Clause 172 requires every person entering into an international or specified domestic transaction in a tax year to obtain and furnish, by the specified date, a report from an accountant in the prescribed form, signed and verified as prescribed, setting forth such particulars as may be prescribed; the clause makes the obligation statutory, preserves applicability across taxpayer categories, and defers procedural form, verification and timing details to subordinate legislation while maintaining continuity with the existing reporting mechanics.
    Act RulesBills
    Show AI Summary
    Transfer pricing documentation: contemporaneous records required and rapid furnishing on demand to enhance transparency and enforcement.
    Clause 171 mandates maintenance and furnishing of prescribed transfer pricing documentation by persons entering into international or specified domestic transactions and by constituent entities of international groups, while delegating the specific content, retention periods, thresholds and filing procedures to rules. It enshrines a ten day furnishing requirement with possible extension, cross references definitions to the Bill's reporting provisions, and anticipates master file, local file and country by country reporting formats, thereby consolidating and modernising existing documentary obligations.
    Act RulesBills
    Show AI Summary
    Secondary adjustment: statutory deemed advance and repatriation rule with alternative option to pay additional tax in lieu of interest.
    Clause 170 mandates secondary adjustment where a primary transfer pricing adjustment of a prescribed monetary threshold increases income or reduces loss and excess money is not repatriated within the prescribed time; unrepatriated excess is deemed an advance to any non-resident associated enterprise and attracts notional interest computed as prescribed, with an alternative statutory option to pay an additional income-tax that is final and bars further credit or deduction.
    Act RulesBills
    Show AI Summary
    Advance Pricing Agreement application: modified returns must align tax assessments with agreed transfer pricing terms and timelines.
    The statutory mechanism requires taxpayers to furnish a modified return limited to APA-impacted items within a prescribed post-agreement period, treats that filing as a return for assessment purposes, and directs assessing officers to modify completed assessments or complete pending proceedings in accordance with the APA; designated limitation and deeming provisions clarify timelines and the status of proceedings to ensure retrospective yet circumscribed implementation of the APA.
    Act RulesBills
    Show AI Summary
    Advance pricing agreements secure pre determination of arm's length pricing to enhance transfer pricing certainty and reduce disputes.
    Clause 168 preserves the APA framework by empowering the Board, with Central Government approval, to determine the arm's length price or manner of attributing income to India for international transactions; to specify statutory and rule based methods (with adjustments); to make APAs prevail over general transfer pricing provisions; to bind both taxpayers and tax authorities for covered transactions; to permit rollback for prior years; and to declare APAs void ab initio for fraud or misrepresentation, with corresponding limitation period consequences and scheme making authority for procedural rules.
    Act RulesBills
    Show AI Summary
    Safe harbour rules mandate acceptance of declared transfer prices and deemed income, delivering taxpayer certainty while limiting administrative discretion.
    Clause 167 empowers the Board to prescribe safe harbour rules under which income-tax authorities shall accept the transfer price or deemed income declared by the assessee for transactions falling within section 9(2) and arm's length price provisions, creating a statutory presumption that reduces administrative discretion and dependency on detailed rule-making to specify eligibility, thresholds, documentation, and procedural requirements.

    TMI Notes

    Back

    All TMI Notes

    Showing Results for :
    Reset Filters
      No Records Found

      TMI Notes

      Back

      All TMI Notes

      whatsappJoin Channel
      Showing Results for : Reset Filters

      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

      Contents
      Acts
      Rules & Regulations
      Summary
      Note

      Note

      -

      Bookmark

      Print

      Print

      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