Taxation of Companies after the taxation laws(amendment)ordinance, 2019

As we all are suffering due to pandemic cause COVID-19, our economy has also suffered a lot. Our government has done a lot for the people and for our economy as well.

The government has found a way to support our economy and give help to little and medium citizens. The tax rates on some kind of organizations and local manufacturing organizations has been diminished to 22% and 15% subject to certain conditions.

The Central Government has come out with Taxation Laws (Amendment) Ordinance ,2019 applicable for Assessment Year 2020-21.

Some special types of companies have given rebate in payment of Corporate Taxes and same will be applicable from AY 2020-21 or FY 2019-20.

LET’S CONSIDER NEW AMENDED /INSERTED PROVISIONS UNDER THE INCOME TAX ACT, 1961

TAX ON INCOME OF CERTAIN DOMESTIC COMPANIES [SECTION 115BAA]

Section 115BAA has been inserted by Ordinance and same will be applicable from AY 2020-21.

CONDITIONS TO BE FOLLOWED FOR AVAILING PROVISIONS;

1. The assessee will a domestic company. It may be public or private or listed or unlisted company. There are no restrictions on Annual Turnover, shareholders may be resident or non-resident. it may be controlled by Indian or foreign entity. There is no restriction on formation of company. It may be newly incorporated or established domestic company.
2. Total income of the Company is computed without claiming below mentioned deductions;
• Deductions under Section 10AA.
• Additional depreciation u/s. 32(1) (iia)
• Deduction u/s. 32AD
• Deduction u/s. 33AB
• Deduction u/s. 33ABA
• Deduction u/s. 35(1)(ii)/(iia)/(iii)/35(2AA)/35(2AB)
• Deduction u/s. 35AD
• Deduction u/s. 35CCC
• Deduction u/s. 35CCD
• Deduction under any provisions of Chapter VI-A(C) [ some sections such as 80HH to 80RRB] but other than the provisions of Section 80JJA.
3. The total income of the company is calculated without adjusting brought forward loss from any earlier years (if such loss pertains to any deduction under the aforesaid sections). Such type of loss shall not be carried forward to be setoff next years.
4. The total income shall be computed after charging depreciation for the year and calculated as prescribed.

TAX RATES

1. if aforesaid conditions have been complied, the income of the Company will be taxable at the rate of (22 +SC+HEC) %.
2. If such company has other income also related to provisions of Sections of Chapter XII [ such as Sections 110 to 115BBG other than income under sections 115BA and 115BAB]. Then tax on such income will be calculated at the rates specified in these sections.
3. Surcharge will be applicable as follows;

OPTIONS AVAILABLE;

1. A domestic company will avail above option on or before due date of filing of returns under provisions of Section 139(1) of the Act on or after April, 2020;
2. This option can be exercised for any previous year relevant to the assessment year 2020-21 (or any subsequent year);
3. Once option availed for any assessment year by a company, it can not be changed in next assessment year.
4. MAT APPLICABILITY;
• The provisions of MAT under Section 115JB will not applicable on companies opting for lower tax regime;
• The benefit of adjustment of brought forward MAT Credit will be available.

Conclusion

The government has taken various steps to boost our economy and for the welfare of business world and society at large. The COVID-19 pandemic, brings whole world on foot. The developed and developing both are affected a lot. The government has come out with some more provisions to reduce tax of domestic company. We shall consider all those provisions in next article.

Disclaimer

The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Although care has been taken to ensure the accuracy, completeness, and reliability of the information provided, author assume no responsibility, therefore. Users of this information are expected to refer to the relevant existing provisions of applicable Laws and take appropriate advice of consultants. The user of the information agrees that the information is not professional advice and is subject to change without notice. Author assume no responsibility for the consequences of the use of such information.