Introduction

The new tax regime for corporates in India offers alternative tax rate structures that are simpler and more competitive, designed to promote investment, ease of doing business, and transparency in corporate taxation. Introduced through amendments in the Income Tax Act over recent years, these new regime options allow companies to opt for reduced tax rates with the condition of forgoing various exemptions and deductions. This marks a significant policy shift toward a simplified and globally aligned corporate tax framework.

Section 115BAA – Concessional Rate for All Domestic Companies

Section 115BAA provides an option for all domestic companies to pay tax at a flat rate of 22%, plus applicable surcharge and cess, without claiming most exemptions or deductions. Companies opting for this regime must:

• Not claim incentives like additional depreciation, investment allowance, SEZ benefits, or deductions under Chapter VI-A (other than Section 80JJAA and 80M).
  
• Not be subject to MAT (Minimum Alternate Tax).
  

This regime is widely popular for companies seeking long-term tax predictability and fewer compliance complications.

Section 115BAB – For New Manufacturing Companies

Section 115BAB offers a reduced tax rate of 15% (plus surcharge and cess) for new domestic manufacturing companies, subject to certain conditions:

• The company must be incorporated on or after October 1, 2019.
  
• Manufacturing should commence on or before March 31, 2024.
  
• No other deductions or incentives can be claimed.
  
• The company should not be formed by splitting up or reconstructing an existing business.
  

This regime is aimed at boosting domestic production and attracting global manufacturers to set up operations in India.

Comparison with Old Regime

Under the old (existing) regime, domestic companies could avail of multiple deductions and tax holidays (e.g., under Sections 80-IA, 80-IB, and 10AA), but at higher tax rates—generally up to 30% for large companies (turnover above ₹400 crore). The old regime continues to apply by default unless the new regime is opted for.

One-Time Irrevocable Option

Once a company opts for the new tax regime under Section 115BAA or 115BAB, the option is irrevocable and cannot be changed in subsequent assessment years. Hence, the decision requires careful analysis and long-term tax planning.

Exemption and Deduction Restrictions

Companies under the new regime must forego key exemptions such as:

• Additional depreciation under Section 32(1)(iia)
  
• Investment-linked deductions under Section 35AD
  
• SEZ deduction under Section 10AA
  
• Deductions under Sections 80-IA to 80-IAC
  
• Set-off of carried forward losses related to disallowed deductions
  

MAT Not Applicable

A major benefit under Sections 115BAA and 115BAB is the non-applicability of MAT. This relieves companies from calculating book profits and paying a minimum alternate tax, thereby simplifying compliance.

Relevance for Tax Planning

Companies with fewer eligible deductions, low capital investment, or simpler business models may benefit from the new regime. On the other hand, entities enjoying substantial deductions and incentives under the old regime may need to evaluate the cost-benefit before opting for the concessional rates.

Disclosure in Tax Return

Corporates must declare their choice of tax regime in the Income Tax Return (ITR-6) and submit Form 10-IC (for 115BAA) or Form 10-ID (for 115BAB) within specified timelines. Non-filing results in the company being assessed under the old regime by default.

Conclusion

The new tax regime options for corporates reflect India’s move toward a simplified and investment-friendly taxation structure. By offering lower rates in exchange for reduced deductions, the government aims to create a cleaner, more transparent tax environment. Corporates must strategically assess their eligibility, financial profile, and long-term plans before making an informed and irrevocable choice.

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