Section 115BA of Income Tax Act: Meaning And Eligibility
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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!
Table of contents
What is Section 115BA?
This section 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 Fulfil 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.
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
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.
Frequently Asked Questions
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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