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!
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.
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:
Here is a list of sections, the deduction for which are not allowed while calculating the total income tax under section 115BA:
Here are some manufacturing businesses that will not apply under Section 115BA:
Tax rates applicable to Domestic Companies under section 115BA are:
Also Read: Section 80U Of The Income Tax Act
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.
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.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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