Section 115BA of Income Tax Act: Meaning And Eligibility
Are you planning to set up a manufacturing business?
While market research and coming up with a business plan are some necessary aspects to pay heed to, you should also know about your tax liabilities from the very beginning. One of the sections under which such businesses are taxed is Section 115BA of the Income Tax Act.
Scroll down to know what this particular section is all about!
What is Section 115BA?
Section 115BA of the IT Act deals with applicable tax rates for manufacturing companies in India under certain conditions. For manufacturing businesses that fulfil all the Chapter XII provisions (except for Section 115BAAA & Sec 115 BAB), the tax rate is 25%.
One of the subsections of Section 115BA states that there is no time limit given to domestic manufacturing companies for choosing lower-income tax. They can make use of the Section 115 BAB benefits any time once they adjust the brought forward losses.
Note that to make sure that the tax rate remains at 25%, there are certain conditions you must fulfil.
Also Read: Section 115BAA: Provisions For New Tax Rate For Domestic Companies
Conditions to Fulfill to Qualify for Section 115BA
Here is a list of conditions you must take care of in order to qualify and utilise the benefits of Section 115BA of the Income Tax Act:
- Both the registration and establishment of the manufacturing company should have been completed on or after 1 March 2016.
- The organisation has to be associated only with a manufacturing business that produces articles or things. This must include research about those articles and their distribution of it as well.
- Ensure that the company did not already claim benefits of other deductions under the IT Act. This includes everything from Section 10AA to Section 80TT (including Section 32AD, Section 33ABA, Section 35 etc.
- Moreover, the companies cannot claim deductions under the provisions of Chapter VI-A, which is under the heading “C.—Deductions in respect of certain incomes”.
- The company can exercise this option until the ITR filing’s due date.
- If a company wants to opt for benefits u/s 115 BAA, only then can it opt out of benefits from Section 115BA.
- As per the rules of CBDT, this option will be present in Form 10-IB. One needs to submit the form online under EVC or a digital signature.
List of Deductions not Allowed while Calculating Total Income Tax under Section 115BA
Here is a list of sections, the deduction for which are not allowed while calculating the total income tax under section 115BA:
- Section 10AA: Deductions from the Special Economic Zones (SEZ) unit.
- Section 32AD: Expenditure that is allocated on machinery and new plants manufactured in the notified backward areas in the states of Bihar, West Bengal, Telangana and Andhra Pradesh.
- Section 33AB: Deduction given on rubber manufacturing, tea and coffee.
- Section 33ABA: Deposits made to the site restoration fund by the companies producing or extracting petroleum and natural gas in India.
- Deduction given under section 32AC, 35(1)(ii)/(iia)/ (iii)/ 35(2AA)/(2AB), 35AC.
- Section 35AD: Capital spent by any particular business.
- Section 35CCC: Investment in agriculture extension projects.
- Section 35CCD: Investment in projects concerning skill development.
- Deduction given under sections 80H to 80TT except for 80JJAA.
- Additional deduction given under section 32.
- No set-off or carried forward losses accredited to any of the deductions mentioned above from previous years.
Manufacturing Businesses that Do Not Qualify for Section 115BA
Here are some manufacturing businesses that will not apply under Section 115BA:
- Mining
- Books printing or cinematograph film production
- Any company that bottles gas into cylinders
- Conversion of marble blocks or items of the same kind into polished slabs
- Other businesses that the Central Government has notified on this behalf
New Effective Tax Rates Under Section 115BA
Tax rates applicable to Domestic Companies under section 115BA are:
- 25% tax will be imposed on the income of certain manufacturing companies.
- 7% surcharge is applicable if income exceeds Rs. 1 crore and 12% if it exceeds Rs. 10 crore.
- 4% cess is applicable
- 15% minimum alternate tax is applicable.
Also Read: Section 80U Of The Income Tax Act
Final Word
Hopefully, this article has managed to cover all the intricacies of Section 115BA of the Income Tax Act. Along with this, business owners should keep in mind that not all of a business’s income is taxable. So, make sure to compute your taxes correctly and learn about the exclusions.
FAQs on Section 115BA
Ans: Yes, minimum alternate tax is applicable u/s 115BA, and all manufacturing businesses must bear this liability. As per the Income Tax Act, MAT is charged at 15% for such enterprises. Under Section 115BAA and Section 115BAB, MAT is not applicable.
Ans: According to Section 115BA of the Income Tax Act, the surcharge for any domestic manufacturing company with a net income below Rs. 10 crore is 7%. For domestic companies with a total income above Rs. 10 crores, a surcharge of 12% is applicable.
Ans: Under Section 115BA, the basic rate is 25%. However, this rate is different for companies filing taxes under Section 115BAA of the Income Tax Act. For those businesses, the basic tax rate is 22%. Keep in mind that Section 115BAA applies to all Indian businesses.
Ans: Section 115BA applies to only domestic businesses that manufacture items and products in this country. However, all businesses operating in India are free to file their taxes under Section 115BAA of the Income Tax Act, 1961.
Ans: Section 115BA of the Income Tax Act, 1961 is applicable from the Assessment Year 2017-2018. However, other subsections of Section 115, such as Section 115BAA and Section 115BAB, have come into effect from Assessment Year 2020-2021.
Disclaimer
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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