Categories: Income tax ReturnOthers

Alternative Tax Regime for Company & Co-operative Societies

Alternative (lower) tax regimes are available to assessees other than individuals/HUFs under the Income Tax Act.

What does it mean?

The Income Tax Act offers certain companies and co-operative societies the option to pay tax at concessional tax rates under special provisions. However, these regimes are not the default tax regime. An eligible taxpayer must specifically opt for the regime by filing the prescribed form before the due date for filing the Income Tax Return (ITR).

Brief Overview of Each Regime

Alternative Tax Regimes Available

Section Applicable To Form to be Filed
Section 115BA Domestic Company Form 10-IB
Section 115BAA Domestic Company Form 10-IC
Section 115BAB Domestic Company Form 10-ID
Section 115BAD Co-operative Society Form 10-IF
Section 115BAE Co-operative Society Form 10-IFA

Alternative Tax Regime for Domestic Companies

Section 115BA

  • Applicable to certain domestic manufacturing companies.
  • Provides a concessional tax rate subject to specified conditions and restrictions on deductions.

Section 115BAA

  • Available to domestic companies.
  • Allows taxation at a concessional rate (commonly known as the corporate tax reform regime).
  • Companies opting for this regime forego several exemptions and deductions.
  • Allows domestic companies to pay tax at a concessional rate of 22% (plus surcharge and cess), resulting in an effective tax rate of approximately 25.17%.
  • Companies opting for this regime must forgo various deductions, incentives, additional depreciation, and certain loss set-offs.

Section 115BAB

  • Available to newly incorporated domestic manufacturing companies.
  • Offers one of the lowest corporate tax rates, subject to stringent conditions regarding incorporation and manufacturing activities.
  • Allows newly incorporated domestic manufacturing companies to pay tax at a concessional rate of 15% (plus surcharge and cess), resulting in an effective tax rate of approximately 17.16%.
  • Companies must satisfy prescribed manufacturing and incorporation conditions and cannot claim specified tax incentives.

MAT Exemption

    • Companies opting for Section 115BAA or Section 115BAB do not need to pay Minimum Alternate Tax (MAT).

Alternative Tax Regime for Co-operative Societies

Section 115BAD

  • Provides a concessional tax regime for co-operative societies. Requires the society to give up specified deductions and incentives.
  • Allows resident co-operative societies to pay tax at a concessional rate of 22% (plus surcharge and cess) instead of the normal tax rates.
  • Societies opting for this regime must give up specified deductions and incentives.

Section 115BAE

  • Introduces a lower tax regime for resident co-operative societies on conditions similar to those applicable under concessional corporate tax regimes. Allows newly established manufacturing co-operative societies to pay tax at a concessional rate of 15% (plus surcharge and cess), subject to prescribed conditions.

Lower AMT & Surcharge

  • The Alternative Minimum Tax (AMT) rate for co-operative societies stands reduced to 15%.
  • The surcharge on income between INR 1 crore and INR 10 crore is capped at 7%.

Important Compliance Requirement

A taxpayer who wishes to opt for any of these concessional tax regimes must:

  1. Check eligibility under the relevant section.
  2. File the prescribed form (Form 10-IB, 10-IC, 10-ID, 10-IF, or 10-IFA as applicable).
  3. Submit the form on or before the due date for filing the ITR.

Key Takeaway – Alternative Tax Regimes Available

  • These provisions allow eligible companies and co-operative societies to reduce their tax burden through concessional tax rates.
  • However, in exchange, they must generally forgo various deductions, exemptions, and incentives available under the normal provisions of the income tax act.
  • Before opting for any such regime, taxpayers should compare their tax liability under both the normal and concessional regimes.
  • The Income-tax Act offers concessional tax regimes to eligible domestic companies and co-operative societies through Sections 115BAA, 115BAB, 115BAD, and 115BAE.
  • While these regimes reduce tax rates significantly, taxpayers must generally surrender various deductions, exemptions, and incentives available under the normal tax provisions.
  • Before opting for any concessional regime, taxpayers should compare their tax liability under both regimes to determine the most beneficial option.
Tags: Alternative Tax Regime for Company
3 months ago
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