16 Corporate Tax Planning & Management Chap. 2 2.5 Tax on total income of a compa * compet is assessed like any ether ussexsee, However, its iobility differs in nwo respects |. No ekemption limit: A company docs ‘not enjay any exemption hinit, 2, Plat Rate of Tay: A company pays inconvertax ut a flat rate instend of Slab rate (0 Normal rate of tax in caxe of « domestic company: Ifthe company docs-mot eptte be | Ifthe companyopts | Ifthe company isa taxed at per as per section 115R4A | to be taxed under the | new manufacturing or section 11SBAB. ew rogime, ic. u's. | company and it opts TISBAA provided It to be faxed uly satisfies the IISBAB provided tt Sanditions of section | satisfies the canditions | LISBAAG) of section 115BAB(2) For details see para. | For details see para 2Se | 2d (ai the total cumoveror | 258 ] gioas-recerpts of the pecisous year 2020-25 does not oxceed | 206 isa | 2400 crore | (b) In all other cases 30% (2) Certain manufacturing domestic compinies, who opt | 254%, to he taxed u's 11SBA provided it satisfies the conditions of section | HSBAGQ) For details sor Para 2,5b | Surcharge: | Surcharge af the fate of 7% shall be levied in case of a domestic company, 10% 10% Af the total income of the domestic inrespective of the fet -| Cinrespective of the fact company ‘exceeds @Toroee but dows | © : whether the total whether the total | Dak Steers Fe ate Satan Gl conus lap ibawer: | Aacumeic her dtee Ge 12% “shall. be levied, if the otal | ‘srore than ZI crore) mote than 21 crore} income of the domestic company ’ exceeds 110 crore Marginal relief, However, the total | Not applicable Not applicable amoun payable as income-tax and surcharge on total iticome exceeding £1 crore bat not exceeding €10 crore, shall not exceed the total amount Payable as imcome-tax on a total incowié of @f crore, by more than the amount of income that exceeds 21 crore, The total amount payable as income-tax and: “surcharge on total income exceeding #10 crore, shill nat |‘Chap. 2 (ii) Assessment.of Companies W exbecd the total amount payable = 1 income-tax ant surcharge on a total income of £10 crore, by more than the [amount of income that exceeds €10 \eroin, | | Ces: Health und Education Coss on | Cess: Health and ‘ess: ‘Heslih and Income Tax’ @ 4% on income-tax | Education Cess on Education Céss on inclusive of surcharge, wherever | Income Tax’ ¢inclusive | logome Tax’ (inclusive applicable) shall be levied, of murchuege} @.4% on | of surcharge} (@i 4% on incomie-tax shall be income-tax shall be | levied. levied. Narmaf rate of tax in case of a foreign company: — 40% Surcharge: In case of companies other than domestic enmpanies, the surcharge of 2° shail be-levied ifthe total income exceeds Fl crore but does net exceed T10.crore: Fhe surcharge at the rate of $85 shall be tevied if the total income of the company ‘other than domestic company exceeds 10 crore, Marginal relief; However, the total amount payable as income-tax and surcharge on total income axcéeding ti:crore. but not exceeding £10 crore, shall not-exeeed the total amount payable as income-tis olf a total come, of 2} crove, by more than the antount of income that exceeds €1 crore, The total améunt payable as inoome-tax and surcharge.on toial income ‘exceeding 210 crore, shall not exceed the tosal amount payable as incorne-tax and surcharge Sn a total income of €10 crore, hy more thin the amount of incon that exceeds #10 crore. Cessi ‘Health and Etuestion Cese ot tncomie Tax’ @ 4% an ineeme-tax (Inclusive of surcharge, wherever applicable) shall bé levied, Special rates of income-tax 1. Short-term capital gain referred to in section LEA ‘om equity shares. in a company or units ofan equity oriented fund where the transaction is chargeable to securities transaction tax 15% 2. ‘Tax on long-term espital gains as per section 112 20% (where the long-teem: capital gain is covered by- section. LISAB, 115AC or LISAD or there is a longterm, capital gai to non-resideat from unlisted. securities subject to certain conditions, it is taxable at 1096) 3, Taxon long-term capital giins arising from transfer of long-term capital assets, being equity shares of @ company or a unit of equity oriented fund or a uit of business trusts on which STT has been paid 1 4, Tax on winnings ffom lotteries, crass word puzzles, ruces including horse races, he, ae $. Tax oa ingame by way of dividends declared, distributed or paid by a specified foreign company {Section 115BBD] 15% &. Tox on income from transfer of carbon credits ioe 2Sb Tax on income of certain manufacturing domestic companies [Section LISBA] @) Certain manufacturing domestic companies given am option to be taxed at the special vate of 26% [Section 11SBA(1)]: Norwuhstanding anything: contained im this Act but subject to the other provisions of Chapter XII, ather:chun those menfloned under section ]ISBAA and section FISBAB, the income-tax payable in respect of the total income of a person, beitig a domestic company, for any: previous year relevant to the assesunient year beginning on oF after 1.4 2017, shall, at the option of such person, be computed @) 25%, ifthe conditions specified in section 11SBA(2) are satisfied. Oe eel,18 Corporate Tax Planing & Management Chap. 2 (2) Specified conditions for opting provirions of section 115BA(1) [Section 115BA(2)] (a) the compuny has been set-up and registered on or afier 13.2616; (2) the companty is tot sngaged'in any business other than the biisinevs of tianufacture or production of any article or thing and research im relation to, or distribution of; such article or thing manufactured or produced by it; and {e} the total income of the compuny has been computed:— () without a ~— deduction under the provisions of section 104. (relating to’ speciat economic zoneh, or ~ benefit, of -soxeterited depreciation/additional depreciatiod under section 3201 Kula}, or i —, benefit of investment allivaince under séction 32AC ar-under section 2A, ar — deduction under section 334.8 (tea/coffee/rubter development acceunt), or — section 33ABA (site restormtion fund), or — section ASCII. ao). Coe): séction 352AAI, section I5/IAB) relating tes soneiiet paid omen Har scnentrtic remenreiorkl rekeacehh er —_ seution 33A.C (expenditure ow eligible projects und scheate}, or — section 35AD (deduction on account of eapital expenditure on specified basiness), or — section 3$CCC {agricultural extension pasieet), or — seetion ISCO (Skill development penject, or — BY provisions of Chapter V1-A under the heading “C_—Deductions on respect of certain incomes” other than the provisions of section SOJIAA: (if) without set off of any toss carried forward from any earlier assessment year if such less is attributable 1 shy of the deductions referred to In sub-clause () of clawse (c) above: and (HH) by claiming depreciation onder section 32, other thin additional depreciation under section 32(1 Mila), determined in the manner as may be prescribed. ee ry ere 43) Section not to apply unless the option is exercised in the prescribed manner on or before due date specified ander section 1391) (Section 11SBA(4)]: Nothing contained in this Séction shall apply unless the option is exercised ‘by the person in the preseribed manner {See rule EAD and Form No: 10-11} on or before the due date specified under section 139(1) for furhishing the first of the returns of Income which the person is required to furnish under the provisions af this Act: Provided: thot once the option. Hit: been exercised for any previous year, it cannot be subsequently withdrawn for the same-ar-any other previous wear, Provided further where the person exercises option under section HISBAA, the option under this-section may be withdrawn (Second proviso inserted by The Taxation Laws {Amendment} Act, 2019, wet AY. 2020-21), a‘Chap. 2 Aséeissment of Companies 9 ccna provisions of tax ow Income of certain domestic companies referred to in section “HeBAA (1) Rate of income-tay In case of a: domestic company [Section 1ISBAA()) Notwithstanding anything contained in this Act but subject 10 the provisions of Chapter NIL {other than those mentioned under section F15BA and section 115BAB), the imeone-tax payable im respect of the: total income of a person, being ii domestic company, for any Previous year televant to the assessment your beginning om or after 14.2020, shall, at the option of such person, be computed at the rate of 22%, if the conditions contained in section TISBAA(Q} ure satisfied i Option exercised for section 11SBAA ta become invalid if the conditions contained in section 115BA.A(2) are not satisfied [Proviso to section 115BAA(1}] Where the person fails to satisly the conditions contained in-section L1SBAA(2) in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous your and subsequent asecssment years and other provisions of the Act shall apply, as if thé dation had not been cxercised tor the assessment year relevant to that previous year and subsequent assessment years. ‘Specified conditions for epting provisions of section ILSBAA(1} [Section 1ISBAA(2)} ‘The total Income of the company will be computed, — () without any— — deduction ander the provisions of section IOAA (relating to special economic one), oF benefit of seceleraied depreciation‘additional depreciativn under section 32(1 iia), oF benefit of iinestiient allowance under section 32AD, ot deduction under section 33.45 (relating to tea‘coffec/rubber development account), of deduction under section JFABA (relating to site restoration flind), or deduction under section 35{1)(ii) (relating to any sunt paid to certain research associations or to a university, college or other institution tw bo used. for scientific Tescarch), Mocuction under section 35(1}( ia) {relsting to any sum paid too company to-be used ‘by infor scientific research), deduction under section 33({1} ii) (relating to any sum paid to certain research associations or to-a university, college or other instinution to: be used. for research in ‘social stience of statistical research), deduction under section 35(2AA) (retating to any sum paid.te-a National Laboratory Or 4 University or an Indian Institute of Technology ara specified person to-be used for scientific research undertaken under an approved progtamme, deduction, under section 35(2AB) (relating to uny-expenditure incurred on in-homse scientific rescarch and develepment facility (not being expenditure in the nature of cost of any land or building) by no company engaged in the business of bio~ technology or in any business-of manufacture or production of any article or thing, not being a article ar thing specified in the list of the Eieventh Schedule. deduction under’ section 35AD (relating to deduction on accoumt of capital expenditure on specified busingss), or deduction under section 35CCC (relating to agricultural extension project). or deduction under section 3SCCD (relating to skalt development project), or20 a (3A) 4) Corporate Tax Planning & Management Chap. 2 —_ deduction under any provisions. of ‘Chapter VILA under the heading °C. te: — Deductions in respect af certain incomes” (ie, BO-LA wo 80Q, whichever = applicable to a company other than the provisions of section S03JAA). In other words for previous year 2019-20, Le, AY) 2020-21, deduction ws 806 and S0GGH. will be available, However, wef ALY. 2021-22, no deduction under Chapter VTA. except deduction u/s. SUJJAA und BOM will be allowed. GH) without set off of any loss carried forwand of depreciation from any earlier asseestnent year if such loss or depreciation is mtributable. to-any of the deductions referred #0 in sub-clause (i) above (See also section 115BAA(3) below}, (ii) without set off of any toss or allowance for unabsorbed: depreciation, deemed so under ection 72A, if suck foks or depreciation is amributuble to any of the deductions referred gin clause (1) abowe: and (iv) by claiming the depreciation, if any, Under any provisions of section 32, (other than additional depreciation under section 32(1\ Ha}, determined in sueh-manner as may be prescribed Loss and depreciation referred to in clause (if) und clause (ii) above shall be deemed to have been already given full effect to [Section LISBAA(3)] ‘The loss and depreciating referred to in, clause (ii) and clause (iii) above shall be deemed to have been already given full-effect to and no further deduction for such Toss or depreciation shall be allowed for any subsequent year, Adjustment to the written down value of the televant block to be made if the effect of depreciation allowance has not been given full effect to prior to the assessment year 2020-21 [Proviso to section 115B4.4(3)] Where there is:0 depreciation allowance itt respect of-a block of assets which has not been given full effect to pridy to the ssscésment yeur 2020-21, corresponding adjustment shall be qnade te the written down value of such black of assets us on }4.2019 in the prestribed manner, if the option under'section 1 [SBAA(S}) i8 exercised for 4 pretiows year relevant to the assesament year heginning on 142020. [Also see Notification No. #2/2020, dated 110.2020 below] Notification No. 82/2020, dated 1.10.2020 For the purposes of section | 1SBAA, if the fellewing conditions are satisfied, namely: ~ (f) option under section 11SHAA(4) thereof is exercised for a previous peer velevant to the assessment year beginning on 1.4.2020; ii) there is a depreciation allowance, in tespeet of a Block off assets from any earlier aseessinen! year or allowance of unabsorbed depreciation deemed so under section 724, which is attributable to the provisions: in section 32(1)(iia) (relating, to additional depreciation); and (iii) such ‘depreciation or aliowatice for unabsorbed depreciation ig not allowed to be set aff under section 1] SBAA(2\¢ii) or Gilt) thereof, the written down value of the block of assets as on 14.2019: chall he increased by such depreciation or allowance for unabsorbed depreciation not allowed to be set aff. [Second proviso 19 rule 5(1)] Conditions contained in section 1ISBAA(2) above to be modified to the extent the deduction under stction 801A is available to such Unit [Section 1158 4.4(4)) Incase of # person, having a Unit in the International Financial Services Centre, as referred to in seotion SOLA(LA), which has exercised option onder section 17$BAA(3), the conditions contained in-section |ESBAA(2) shall be modified i the extent that the deduction under section SOLA shall be available to such Unit subject to fulfitrment of the conditions contained jn the said section.Chap. 2 Assessment af Companies 2 (8) Assessee to opt for section 11SBAA in the prescribed: maniier before the specified date (SA) Person may exercise the aption under this ection: (1, (5B) Option for scetion HSBAA once exercised cannot be su [Section 11SB4.4(5)) Nothing contained in section 1454.4 shall apply wtilésy the option 1s exercised by the petson in the prescribed manner (See rule 21AE below-and Farm No, L0-IC) on ar before the due date specified uoder relevant to tke ass lon under sub-section (5) of section TISBAA, [Rule ZLAE} (1) The option ta be exercised in ucoordance with the provisions of ection LISBAA(S} by a Person, being.s domestic ceiipiny, for any: pieviols year relevant to the assqssii begmning on or alter 14.2020, shall be in Fortin No. 10- (2) The option. in Rerm No. |0-1 shall be fumished electronically either under dijgital signature or electzonic verification code. (3) The Printipal Director’ Geages Income-tax (Systems), a3 the fi) specify the procedure for filing of Form No. 10-1€; {ii} Specify the data structure, standards avd-iinainer of generation of electronic Verification code, referred to in rule THAE(2), for verifieatinn of the person furnishing the said Ferm; a (iil) be responsible for formulating and implementing appropriate security, archival and tetrieval policies tn telation te the For se furnished « Seetlon LISBAA) if certain, conditions of section 115BAB are violated (First proviso t section 11SBAA(5}) Th case of a person, where the option exercised by it under section 1ISBAi has been rendered invalid due to violation of conditions contained in— — ‘sub-clause (i) (relating to. machinery or plant previously used or any chuise (Iii) (relating to Suitding proviously used ay a hotel or convention (a) of section 11/SBAB(2} or clause (b) (relating to company engaged ii aniy business other’ than manufacture of production, esc.) of section 115BAH(2), Sach person may exercise option under this section (i.e, section 113BAA}: sequently withdrawn (Second wirptse) or. gub— ire) of Clause business of proyisu fo section 11SHAA(S}} Once the option his beeh exorcised for any previous year, it cannot be subsequently ‘wathdriwn for the sante or any other previous vear. (6) Provisions of section 115JAA not to apply if o person exercises the option under seétion LISBAA [Section 1ESIAA(8)| The. provisions of section 115144 (relat shall not apply io: person vho has exe (7) Surcharge on income-tax on total income computed In respect of any income chargeabie io: tax under tax computed shall be increased by @ surchiirg the rate of £0, Healt and education cess (HEC), Further H&EC @) 4%0-shall be levied on the total tax cluding surchurge) payable by the asscssee., Hence, the tax payable by such eanpany shi to allow wught foeward MAT credit) AA ofthe Income-tix Act, the for the purposes af the Union, ealoulated at Be FS. 1GR Ge 2844 + 1096 + a2GYCorporate Tae Planning & Manapement ‘be noted thot w erieatle company! having eralit of MAT lay. iF it so desires, exercise the companies referred to in-se a) {LA} (iB) acy (Dy ce) ‘Which option under section 114R/AM Sane MUR te said rec azsnst the eepula tx payable under th uutaton regis HS populate Tataian Lave (Amanda) Orchane, 2919 ecial provisions relating to tax om income of certain new manufacturing damostie jon TISBAB x in case of 1 new manufacturing domestic company [Section Rate of income HSBABQ)) Notwithstanding saything contained tm this Act but aubject to the Provisions ‘of Chapter NUL (other tian those mentioned under section LLSBA’ and section 1ISBAA), the income tix Payable ih respect of the toiai income Of a person, being a domestic company, fat any pre ous year relevunt 10 the Assesment year-bepinning on or after 1.2020, afl. at the ‘Sption of Such person. be computed at the rate af 15%, if the conditions comainad in section TESBAGK2) are satisfied Incomes other than derived from minnfacturing or production and incomes in respect of which no specific rate of tax has been provided separately under this Chapter XT to betaved @ 22% [First proviso tw section TISBAN(I)] Where the total income of the person, included: any income,— — which has neither heen derived rom fords incidental te manificturing ur production of anarti¢le or thing, and — Bierbect of ‘ich no-spécific rite of tay bus been provided separately yniler this: Chapter (Le, Chapter XI Telating to determination of fax in certuin special cases), such income shall be teed o 22% and wo deduction or allowance in respect of any. expenditure or ullowance shill be allowed in COMpUling such income; Income computed by the AO. by applying the specified damectic provisions to be taxved @ 40% {Second pravis» ‘0 section LSB 5% 1)] The: income-tay: payable in respect-oF the income of-the jperscin deemed! so under second Bitvise ta scetion 1 5BAR(6) (see below) shall be computed 30%. Short-term capital gain on transfer of a capital asset on which no depreciation is allowable Wo be taxed @ 22% [Third proviso-to section 11SBAB(1}} The imcome-tax payable in respect of icome being. short-ierm sapital gains derived: from (ranser of & capital asset on which no depreciation is allowable under the Act shall be ‘computed (a 22% Option to become. invalid If the conditions contained. Satisfied [Fourth pravise to section | ISBAB(1)) Where the person fails 1 satisfy the conditions cogiained in section HSBABE2) (see below) Tey Previous, yeas, the ‘option “shall-hecoms invalid’ ia respect of the asacsement year relevant ta that previous year and subscquent assessmant yeurs snd other provisions of the Act shall apply to the person ab if the option had wot Been exercised foe the IsseSsmeat fear Pelevant to thal previews year amd Oguent ARKESAeeNL years. Specified conditions for opting provisions af section 11SBAB(1) [Section 115BABQ2)] {8} Fhe company has beet: set-up und registered onor after 1.10 2019, and has commenced munufacturing dt production of an article ot thing on or before 31.3, 2024 and-— section 1ISBAB(2) arc notAssesment of Companies 2 finest is hot formed by splitting: up, or the reconstruction, of w business existeace: Provided that this coidition shall not apply in respect of w Company, Bilanede OF which is formed as aresult of the re-establishment, reconstruction ur revival by the Persist of the business of eny such undertaking ns is referred to in section 33B, in the sircuimstanecs and within the period specified in the said section; (ii) does not use any machinery or plant previously used tor any peirpose, i the eS he Seceates {80} does not use any building previously used ay a hotel oe-a scomvention centre, as the fuse. may be, in respect of which deduction under section 80-11 has been claimed and allowen (b) The company’ is not chgaged.in any business Gthee than the business of manufacture or production Of any article or thing and research in relation t8, or distribition: of, such article or thing manufichured r produced by it; and The “business-of manuilicture’ or production of any article or thing” Shall include: the business of generation of electricity,Corporate Fax Planning & Manage Chap. 2 (c) ‘The total income of the company figs been computed. — (without any deduction under the provisions of #6 IAP iating 1 special eeoriomic zone}, or benefit of accelenited depreciatioo/additivnal depreciation suiler section S201 Mita), of benchit of investment allowance under section 32,40. or. dediiction under section 33,8 {relating to tea/coffecirabber development acvount), or deduction under section J3.ABA (rotating te site restoration find}, oF Seduction under section 35(1)(/4) (relating i any sum paid to certain research ‘associations or to a kimiversity, college or other dastitutnn to be ssed for scientific research), deduction under section 35¢1 (iia) (reliting to any sum paid toa company fn be tised by it for.seientific research), deduction under section 35¢1 Msi (relating ta any sum paid to n research associations or 10 a university, college or other insitulion te be used for research in social seignce of statistical research), deduction undet section 35(2AA) (relating to any sum paid to a National Laboratory or a University or. an Tndian Institute of Technology or x specified person to be used for sciemifie research umdertaken under an approved programme under section 35(@2A4B) (selsting to uny expenditure incurréd’ on in- house scientifig research and dovelapment facility (not being expenditure in the ature of cast of any land or building) by a company engaged in the business of biotechnology or in any business of manufacture or production of any article or thing, not being an article or thing specified m the list of the Elewenth Schedule deduction under section D (relating to deduction on account of capital ‘expenditure on specified business), ar deduction under section 38C CC (relating to agricultural extension project), or deduction under sectign 38CCD (relating to skill development project), deduction under any provisions of Chapter VI-A under the heading Deductions in respect of certale Incomes” Gc, SO-1A. 10 BOQ. whichever ts applicable to 8 Company other than tle provisions-of section SOIIAA). No deduction under Chapter VEA except deduction RTAA and 80M will be allowed without set off of any-loss or allowance for unabsorbed deprecintion deemed se under section 724 where Such Joss oF depeecistion is attributable to any of the deductions referred to in gub-claise (i) above, Explanation —For the remowal of doubrs, it is hereby clarified that in case of an Smalgaination, the option under seetion, | $BAB(7)}-shall remain valid in case of the amalgamated compaiy only and if the tions contained in section 115BAB(2) ae eomtinued to-he sstisfied by such eompany; and ‘by claiming the deprecintion ames the provision of section 32, except clause (ita) of sub-section} of the ssid action, determined in such neinner as may be prescribed. (3) Loss referred ta'in clause (11) of section 11SRAB(2iKc) above to be deemed to kave been already given full effect to [Section 1ISRAB(3)|: The loss referred to in-clause (ii) ofChap. 2 Assessment of Companies 8 “section 115BA.B(2) above, sbnll be detined to have been, given full effact-to and-ae farther deduction for such lass shall be allowed for any subsequent yeur, (4) Board with the ipproval of Central Goverament empowered to inne guidelines for che Purpose of any difficulty [Section 113BABEd)]: If any difficulty arises regarding fulfilment ‘Hf the conditions contained in sub-clause (ii) of sub-clause (iti) of ¢lause (a) of section LSBAB(2) of clause (b) of said sevvion, as the case may be, the Beard may, with the approval. of the’ Centml Government, issue wuidelines for the purpose of removing the difficulty asd to promote manufacturing or production of anticlé or thing using new plantand machinery. (5) Guidelines issued fry the Board under section | ISBAB(4) to be laid before cach House of Parliament and shail te binding on the person and department [Section LISBABIS}I: Every guideline ised by the Bosrl under section 11SBAB(4) sball be inid before exch Hoose:-of Partiament, and shall be binding on the person, and: de incérme-tax authorities subordinate to it (6) How 40 compute profit where there ts cinse fonnéction between the company and any other perion [Section 1ISBAB(6)]: Where a apprens to the Asséssing Officer that, Gwing to the close conncetion between the person to which thid section applics and any other person, vor for any other reason, the course of Business hetween them isso arranged thot the business transacted between them-produces.to the person mote than the ordinary profits which might be expepied to arise in such business, the Assessing Officer stall, in computing the profi aind grins of such bosiness for the Purposes: of this section, take the amount of profits as may be reasonuily deemed to have been derived therefrom Provided! that in case the affrresaid amingement iavolves a specitied domestic trasaction relerredty in Section 92.8. the aniount of profits from suck transaction shall be determined having regurd to arm's lengit price as defied in clause (ii) of section 92F:. Provided further: shat the enount, being profs in excess of the amount of thé profits determined by the Assessing Officer, shail be-deemed to:be the income of the person, (7) Assessée to opt for section 115RAB in the preseribed manner and before the specified date [Section 11SBAB(7)|: Nothing contained in section |{$BAB shall apply unless the option is exercised by the petion in the prescribed iitnher (See male 21AF below and Form No. 10-1D)-on or before the due date specified undet section 1391) far furnishing the first of the reniens of income for any previous yeer relevant to the assessment year comNIencing on or after {4.2020 and such option once exercised shall ‘apply to subsequent: assessment years: Provided that once the option has been exereisod dor any previous jar, it cannot be subsequently withdravin for the same or. any other previous year, Exercise of option under section 11SBAB(7) [Rule 71 AF] (1) The option to. be exercised im accordance with the provisions of section 11$BAB(7) by a Person, being a domestic compatiy, for any previous year relevant to the asstssinent year beginning on ur after 1.42028, shall be an Form No. 10-1D, (2). The option in Form No..10-ID shail’ be fumished electronically either under digital ‘signature or electronic verification code. 5 (3) The, Principal Derector General of Inconmid-lax (Systems) or the Director General of Income:tax: (Systenia), us the ease may be, shali— (i) specif the procedure for filing of Form No. TID; } specify the data structure, ‘standards and manner of generation of electronic Verification: code, refered ‘to in rule 21AF(2}, for verification of the person furnishing the said Porm; and26 Corporate Tax Plarining & Management Chap.2 Gi) be responsible for formulating and implementing: approininte security. archival and Teirieval polivies in relation to the Form so furnished, | Expiinaiion—-Por the popases of Sechion, LISEAN cand hig Siete, the expreion “unabsorbed depreciation shall havi the nearing assigned to in eeetion 72AC7 WE). | (8) Rate of income-tax on total income if the mew manufaeturing domestic company apts for section 11548 | | Nature of Income |Income derived from manufacturing or Produetion of an} article or thing [Section LISBAB(I)) Iiicomne takable at special rate as per Chapter XII, ki) Short-term capital gain referred to in suction 1ELA 3 (i) Long-teris ‘capital gain other. than refered to. in| 1O/2ON, section I ag the case may be 10% on the LCG exceeding €1,00,000 3. [Income computed by the AO plying. the specific 30% Klomestic provisions, {2., where there is close connection between the company: and any other person [Second (prowiso te Section 11SEABETH Si 4. Short-term capital gein-on trarsfer of a capital asset onl 22% vhich no “depreciation is. allowable [Third proviso tol ection 11SBAB(1)] | Rate of income-tax | Ht} Long-term capital gain referred to ia section [2A | 3: (Any shor: incnke (oF he conan [Fitst provise to 2h Section 1ESBAB{1)] (3) Surcharge on income-tax on total income computed under section HSBAB Provided thar in respect of any income chargeable to tx under section LISBAB of the Income-fax Act, the tex computed above shall be increased by x surcharge, fur the purposes he Union, caleataed 9 the rate of 10%, (0) Heaith and education cess (H&EC) Furticr H&EC: i@)-4% shall be'levied on'thé toil tax (including surcharge) payable hy the assesses be tuted under stction 115 BAB, the proviions-of MAT are net applicable iat os Deemed income relating 1 certain companies — Also known as Minimum Alternative Tax (MAT) 26 Provisions of MAT for payment of tax by certain companies {Section 115JB(1)} Tax payable far any assessment pear cannot be less than 13% of book prafie: Where in the case Sf 8 Company, the menmre-tox pavabie en the total income as eamputed ander the Ineome tax Act, in respect of previous year relevant to the assessment year is fess than [$4 of its book profit, such book profit shall be deemed tobe the total income of the assessce and the tix payable by the assessee on sech total income (bonk profit} shall be the'amount of the ineonis-tax at the rete of 14% ‘Thus it case of & company income-tax payable shall be higher of the following two amounts:Chap. 2 Assessment of Companies 27 (2) Tax on total income computed ag per the normal provisions of the Aci by charging applicable ‘normal rates and:special nites if-any income inchsded in the total inoue of the: company is tuxable at special rates, (2) 15% of book protit Example 1: Suppase. the book profits of a company for the assessment year 202, 710,00,000, whereas its total meome (including STCG of €1,60,(00 referred to in section 111-4) us per provisions of Ingome-tay Act-is €4,00,000. If we assume thar normal tate of tax. payable by the company is 30%, the tax dhall be payable as under: z (1) Taxon total income-as per-provisions of the Act, tax on STCG = 24,000 Teferred to in section 111A 21,60,000 (a 15% Tax on balance titel income 22,4000 (a) 30% 72,000 96000 (2), Tak @15%6 om book profits of 810,00,000 1,$0,000 Inthe above case tx payable on total income, Le., $96,000 is Joss then 15% of the book profits, (4, 21,50,000, Hence in this case, deemed total income: shall be 210,00,000) und the tax payable shall be as under: z Tas payable 1,50;,000 Aided Surcharge Nil* Add: Heath and education cess (40 ‘GOK Total tax payable 1.58,000 Surcharge is payable/only when the total ingome of the company exceeds 21 cron, Wherever MALT provisions apply, the book profits are deemed to be the total iacome of the aeseasee, hence surcharge (@) 7% (2%4 in ease of foreign company) will be payable only whien the book profit of the company-exceeds.£1 core. Surcharge shall be 12% (58% in case of foreign company) if the total income of the company exceeds 710 crores). In the above case the book profit which has been treated as deemed total income of the ansessec,, is only 210 lakhs, Rxample 2; Suppose the taxable income of's compuny (whose normal raie of imcomo-tax is 30%) 245.00,000 and the book profit is &1,01,00,00%) | Tax on @48,00,000 ai 20% | Taw on book profits @ L896 ef T1021 00.000 Tox payable on sotal income, Ze., £14.40,000 is less than 15% of book profits, be, €15,15,000 Hence, in this cage deemed total income shall be 71,01,00,000 and the total tax pityable shall be computed by tal marginal relief as under: Fax on €1,00,00,000 @ 15% —__ | 15,00,000 | Tax on $100,009 : 15,000 | 15,15,000.| Surcharge @ 76 of €15,15000, be, 2106050 or 885,000 (Et 00,000 — 15,000) | 95,00 | whichever ts lessConporiate Tax Planming & Management Adkd: Heahih atid cdocation cess @ 4% 64,000 | Touil tax payable | te.6.000) Aiba MAT rate to be 9% ‘d in an International Financial Serviees-Center [Section 1 BCT) Notwithstanding anytit ‘entwined in section 11S3JB(1), where the assessee refs dio therein, ig @ unit located in-an Intemational Financial Services Coie erie tts Hy im comveertible foreign exchange, the provisions of ve the fl words “ifteen per ceal” wherever cocurring in. that sub-section, : ine per cent” cen vubstinned. {ct} “tntornitional Financial Sorvives Gente” dal lave Ose -sainig jean Slanse:{q) Of section 2 of the Special Economic Zones et, 2005 (2) it meena unit established nan Iniernational Financial +.6b Provisions of section.115JB not to apply in certain cases ons of section || 3118 shall-nor apply in case of the following: Y income aceniing or arising to 4 company from Hie insurance business referred 16 my section | (51: whe hat exercised the option referred-to ander section JISBAA or Section HSBAB, (Section (152B(3A)] feign company, if the assesiec iy a resident of 3 country-or-» Specified territory With which Midis hag an Aurcenent refered to in section 801) or the Central Government has adapted any Agreenint under sectiin 90A(1) and he assesses does not have s fiermanent establishment In India in ncoordance with the Provisions of such agreement: or the asseguee i esident of a country with which India does ner have an agreement of the nature referred to in cladse (7) and. the assestee. és mut required to seck registration under any law lor the dime being In fatce telating to: conipanies. [Explanation 4 ta section | S062" : Ge ssstag S4BB or section MBBA or section 44BBB and such incite bas been ‘offered ty t8% af the rants spacitied in those sections. [Pkphemation #4} Di 2.7 Allowing tax credit in respect of tax paid on deemed income under MAT provisions against tax liability in subsequent years [Section 11S2AA| Section TISFAACLA) provides that where anv amiount of tax is:paid under section 11SJE(1) by a company for any assessment vear bezinning on or after 4.2006, credit in respect of the taxes so paid for such assessment year shall he allowed on the difference of the tax paid under sestign 11518 and the amount of tax. payable by the company on its total income computed in accordance with the other provisions of the Act In other words: MAT credit shall’be computed ws under: MAT credit available = Tax pwid under section 11538 — Tax payable on the total income under normal provisions ofthe Act. [Section 11544. A(ZAD} However, to: interest: shall be allowed on the imount of tax credit available under section HISIAA. [First proviso to section 11824 A(24)]‘Chap. 2 Aukestionaiet af Companies 29 Further, where the amount of tx credit in rspéot of any ihcome-tus paid in any country or specified territory outsice. India. under section 90 or section 904 or sectind ‘1, allowed againsl the mx Payable under the provisions of sub-section (|) of section 115JB ‘exceeds the amount of such tax credit Sdmissible agaiast’ the sax. puyable by the assessee ‘on ite income in accordance with the other Provisions-of thes Act, then, while computing the amount of credit under this Subssectinn, such excess Amount shall be jghored. [Second proviso to section 115SA4A(ZA)] ‘The amount of tex credit so determined shall he allowed to be cared forward sind set off ina year when the tx becares payahie on thé total income ‘computed under the regular provisions, However, Bo carry forward shall be allowed beyond the fifteenth assesrment year (teath assessment year upto aseetsment year 2017-18) immediately suecceding the assesimont year in which the iax credit becomes allowable. [Section 11SJAAQ3A}] The act off in respect of the brought forward tax credit shall be allowed jor any assessment yeur-to, he extent of the differcuce between the taz on the tial incume and the tix-which would hieve becn payable under-section F15JB for that aasessment year [Section 1LSJAA(S)} (Risieti willbe aowenin mipic Of MAT paid in ohy RAN year OE] In other words, MAT oredit sill be allowed only in that Previous year in: which tax payable on the total income ss per normal pravisions of the Income-tak Aci is more thin tax payable under section HSB and it shail be allowed to the extent of the following: Tax payable an total income under the normal provisions of the ‘het — ‘tax: payable under section USB = MAT credit to be alfowed. ‘Where as a result of an ofder under sub-section (1) or sub-section (3) of seedon 143, section 144, section 147, section 154, section 155, sub-section (4) of section 45D, section 240, section 284, seotion 260, section 262, section 264 or secteon 264. the amount of lax payuble under this Act is seduced or increased, ak the case may be, the aniount-of tax credit allawed undev this sectien shall also be incressed or reduced accordingly, [Section 11534.4(6)] Where a privale company or untisted poblc company: is eonverted “intn Hiited tability ePertnetsbip in-any previous year, the MAT credit which was available to. the company shall lapse. in other words, the tax. credit under section |/S3AA shall nat be allowed 26 the duccesear LLP [Section “TSIAAG)) Allowability of brought forward MAT credit to a person who Has exercised the option under section 11SBAA (Section 11SJAA(8}] ‘The provisions of section LISIAA (relating to allowability of brought firward MAT credit) shall ‘At apply to a person who has-cxercised the option under section 11SHAA, Hbustration 2,1; From the following information of R Ltd, compute the tax credit available under fection 1152AA and tax payable by it for various assessment years, Will any interest be allowed an the “aindiunt of tax credit avallable under section |1S)AA. tt may be assumed tharthé eaves of tax for future “Years will be the.same ay for assessment yeur 2021-22, MAT rate prior to AY. 2010-11 was 10%6, Th was 15% for the assessment year 2010-11, 18% for the assessment year 2021-12 and 18.5% from Assessment years 201 2-13 to 2019-20. Assume the normal rate of imeome-tax is 205, Assessment Boal profit comprited under Total income as per normal ear section 175/8 INR AG) provisions of facome-tar dct y 2000-10 60,00,000 10.80,000. 2010-11 80,00,000 12.60,000 2011-12 120,008,000 24,00,000 BOD 1,6,00,000 90,00,000 2014 39,040,000 18.00,000