AdvicesBlogConsultationProjectsTax Ordinance 2019

September 9, 2019by KNM

Taxation Laws (Amendment) Ordinance 2019

The Taxation Laws (Amendment) Ordinance, 2019 dated September 20, 2019 has introduced new tax regimes for the domestic companies by inserted two new sections – Section 115BAA and 115BAB. Besides existing basic tax rates for domestic companies of 25% and 30%, two new tax rates have been introduced of 15% in case of new domestic manufacturing companies and 22% for all domestic companies not availing of any tax exemptions. The reduce tax rates can be opted by the companies on fulfilment of certain conditions.

Here is a comparison of different corporate tax regimes for the Assessment Year 2020-21.

Particulars“Before Amendment”

 

“After Amendment”
Section 115BAFirst Schedule to Finance ActFirst Schedule to Finance ActSection 115BAASection 115BAB
Ø  Basic tax rate25%25%30%22%15%
Ø  Surcharge·       7%, if income is between Rs. 1 crore and Rs. 10 crores;

·       12%, if income exceeds Rs. 10 crores

·       7%, if income is between Rs. 1 crore and Rs. 10 crores;

·       12%, if income exceeds Rs. 10 crores

·       7%, if income is between Rs. 1 crore and Rs. 10 crores;

·       12%, if income exceeds Rs. 10 crores

10%10%
Ø  Education Cess4%4%4%4%4%
Ø  Effective tax Rate·       26%, if income is less than Rs. 1 crore;

·       27.82%, if income is between Rs. 1 crore and Rs. 10 crores;

·       29.12%, if income exceeds Rs. 10 crores

·       26%, if income is less than Rs. 1 crore;

·       27.82%, if income is between Rs. 1 crore and Rs. 10 crores;

·       29.12%, if income exceeds Rs. 10 crores.

·       31.2%, if income is less than Rs. 1 crore;

·       33.38%, if income is between Rs. 1 crore and Rs. 10 crores;

·       34.94%, if income exceeds Rs. 10 crores.

25.17%17.16%
Ø  Applicability of MATApplicable at the rate of 15%Applicable at the rate of 15%Applicable at the rate of 15%Not ApplicableNot Applicable
Ø  Condition as to date of incorporationShould be incorporated on or after 01-03-2016Should be incorporated on or after 01-10-2019
Ø  Condition as to date of manufacturingShould commence manufacturing on or before 31-03-2023
Ø  Turnover limitTurnover should not exceed Rs. 400 crores during the financial year 2017-18If turnover exceeds Rs. 400 crores during the financial year 2017-18
Ø  Condition as to the use of assetsa) It does not use any building which was previously used as a hotel or a convention centre;

 

b) It does not use any machinery or plant previously used for any purpose 1

 

Ø  Mode of IncorporationMust not be formed by splitting up or reconstruction of an existing business (Except in case of Section 33B)
Ø  Nature of BusinessManufacture or production of any article or thingManufacture or production of any article

or thing

Ø  Restriction on exemption and deductionCertain deductions and exemptions shall not be allowed*Certain deductions and exemptions shall not be allowed*Certain deductions and exemptions shall not be allowed*
Ø  Restriction on unabsorbed lossesLosses linked with the certain exemptions and deductions can’t be set off and carried forwardLosses linked with the certain exemptions and deductions can’t be set off and carried forwardLosses linked with the certain exemptions and deductions can’t be set off and carried forward
Ø  Whether optional?OptionalMandatory (if optional regimes not opted)Mandatory (if optional regimes not opted)OptionalOptional
Ø  When option can be exercised?In the first year itself on or before the due date for filing of return of incomeIn any yearIn the first year itself on or before the due date for filing of return of income
Ø  Option to opt out of regimeCan switch to Section 115BAA regimeNot AllowedNot Allowed
Ø  Whether covered under Specified Domestic Transactions prescribed under section 92BANoNoNoIf profits are increased artificially

 

* Specified exemption and deductions are follows:

SectionDeduction
Section 10AADeduction for units established in Special Economic Zones (SEZ)
Section 32ADDeduction for investment in new plant and machinery in notified backward areas
Section 33ABDeduction in respect of tea, coffee or rubber business
Section 33ABADeduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India
Section 35(1)(ii)Deduction for donation made to approved scientific research association, university college or other institutes for doing scientific research which may or may not be related to business
Section 35(1)(iia)Deduction for payment made to an Indian company for doing scientific research which may or may not be related to business
Section 35(1)(iii)Deduction for donation made to university, college, or other institution for doing research in social science or statistical research
Section 35(2AA)Deduction for donation made to National Laboratory or IITs, etc. for doing scientific research which may or may not be related to business
Section 35(2AB)Deduction for capital expenditure (excluding cost of land and building) on scientific research relating to business of bio-technology or manufacturing any article or thing
Section 35ADDeduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc.
Section 35CCCDeduction for expenditure on agriculture extension project
Section 35CCDDeduction for expenditure on skill development project
Part C of Chapter VI-ADeduction in respect of certain incomes other than specified under Section 80JJAA

__________________________

  1. Any plant or machinery which was used outside India shall not be treated as used for any other purpose, if following conditions are satisfied:
  2. Before the date of installation, they were not used in India;
  3. These assets were imported into India;
  4. No deduction on account of depreciation has been allowed or allowable on such plant and machinery before they were installed be the assesses.

However, this condition shall be deemed to have been complied with if value of plant and machinery previously used does not exceed 20% of total value of plant and machinery.

KNM India can assist you with a range of complete financial services that range from Corporate advisory to Transaction advisoryPre-incorporation to Post-incorporationInsolvency and bankruptcy code to Secretarial servicesAssurance to Internal audit services, along with Market entry strategy to Foreign company registration in India. To discuss any of these please book your slot, or call us on +91-99105-04170 – or email us at services@knmindia.com to get a quick response.

 

Disclaimer: Information in this note is intended to provide only a general update of the subjects covered. It is not intended to be a substitute for detailed research or the exercise of professional judgment. KNM accepts no responsibility for loss arising from any action taken or not taken by anyone using this publication

 

KNM

KNM Management Advisory Services Pvt. Ltd.Corporate Office
Connect with us
https://knmindia.com/wp-content/uploads/2021/02/knm-world.png
Connect With UsKNM Social Links
Get Connected
KNM Management Advisory Services Pvt. Ltd.Corporate Office
Connect with us
OUR LOCATIONSWhere to find us?
CONNECT WITH USKNM Social Links
Get Connected

© KNM Management Advisory Services Pvt. Ltd All rights reserved.

Copyright by KNM Management Advisory Services Pvt. Ltd All rights reserved.