Key highlights of the major changes in the Taxation Laws (Amendment) Bill, 2019 viz-a-viz Taxation Laws (Amendment) Ordinance.
i.e Applicability of new concessional income tax rate for corporate 22% & 15%
Changes in Section 115BAB
1. It has been proposed that the scope of new provisions of Section 115BAB shall be restricted to the income derived from or incidental to manufacturing activities. Thus, income from such activities shall be chargeable to tax at reduced rate of 15%;
2. The concessional tax rate shall not be available for the short-term capital gains arising from non-depreciable assets, which shall be charged to tax at the rate of 22%. Where short-term capital gains is arising from transfer of depreciable asset, it would be taxed at the rate of 15%;
3. Income which is neither derived from nor incidental to manufacturing or production of an article or thing shall be taxable at the rate of 22%;
4. Following businesses have been proposed to be excluded from the scope of new provisions of section 115BAB:
a) Development of computer software in any form or in any media;
b) Mining;
c) Conversion of marble blocks or similar items into slabs;
d) Bottling of gas into cylinder;
e) Printing of books or production of cinematograph film; or
f) Any other business as may be notified by the Central Govt.
5. Amalgamated company can opt for Section 115BAB if the scheme of amalgamation is not falling within the purview of ‘Splitting or reconstruction of existing business’;
6. In case of amalgamation or demerger, the successor co. shall not be allowed to set-off any loss or depreciation if such loss or depreciation is attributable to prohibited deduction or allowances as specified in Section 115BAB;
7. Where Assessing officer finds that the eligible company earns more than ordinary profits due to close connection with the related parties then the excess profit shall be taxed at the rate of 30%.
Changes in Section 115BAA
1. If a company, after opting for section 115BAA, does not compute its total income for the relevant previous year as per the relevant provisions of section 115BAA, then the option to pay tax at concessional rate shall become invalid for that year and for all subsequent assessment years;
2. If a company has opted for concessional tax regime of Section 115BAB but it subsequently violated the conditions of that provisions, then it may opt for regime of section 115BAA;
3. A company opting for section 115BAA shall not be allowed to set-off the losses attributable to additional deduction allowable under section 32AD in respect of investment in new plant and machinery;
4. In case of amalgamation or demerger, the successor co. shall not be allowed to set-off any loss or depreciation if such loss or depreciation is attributable to prohibited deduction or allowances as specified in Section 115BAA;
5. Units located in IFSCs have been allowed to claim deduction under Section 80LA even after opting for Section 115BAA;
6. As companies opting for section 115BAA are not eligible to set-off the unabsorbed depreciation attributable to additional depreciation, it has been clarified that corresponding adjustment shall be made to WDV of the block of assets in prescribed manner.
Forfeiture of MAT Credit
1. The companies opting for new taxation regimes of Section 115BAA or 115BAB have to forgo MAT Credit available. i.e. the MAT credit available with a company shall lapse on opting the new regimes.