Section 115BAA of the Income Tax Act provides taxpayers with the option to pay income tax at concessional rates as compared to the existing tax slab rates. It is applicable to all taxpayers who have a gross total income of up to Rs. 15 lakhs in a financial year. The concessional tax rate applicable is 10 percent for income between Rs. 5 lakhs to Rs. 7.5 lakhs, 15 percent for income between Rs. 7.5 lakhs to Rs. 10 lakhs and 20 percent for income between Rs. 10 lakhs to Rs. 15 lakhs. This new tax regime has been introduced to provide tax relief to taxpayers and promote digital transactions.
Overview of Section 115BAA of the Income Tax Act
Section 115BAA of the Income Tax Act is a provision for businesses to declare their income to the government in a tax-efficient manner. This section allows businesses to declare their income in a way that is beneficial to both the taxpayer and the government. Under this section, businesses can declare their income in the form of a ‘presumptive tax,’ which is a tax that is based on the assumption of an income level. The government then taxes this income based on the presumptive tax rate.
This section provides businesses with an option to declare their income in a tax-efficient way. Businesses can choose to declare their income at a lower rate than their actual income. This allows them to pay less tax and save more money. It also provides them with a chance to reduce their tax liability and save on taxes.
The presumptive tax rate under Section 115BAA is lower than the normal tax rate. This makes it beneficial for businesses to declare their income in this way. This section helps to reduce the tax burden of businesses and helps them to reduce their tax liability.
In addition, this section also allows businesses to declare their income without having to submit detailed tax returns. This helps to reduce the paperwork burden and time spent on filing tax returns, which can help businesses to save time and money.
All in all, Section 115BAA is a useful provision for businesses to declare their income in a tax-efficient manner. It helps businesses to reduce their tax liability and save on taxes while also reducing the time and paperwork burden of filing tax returns.
Benefits of New Income Tax Rate
Section 115BAA of the Income-tax Act, 1961, provides for a reduced rate of tax for companies engaged in the manufacturing of certain specified products. This section has been introduced to encourage the growth of domestic manufacturing and help the Indian economy become self-reliant. It also aims to support the Make in India initiative.
The benefit of this new income tax rate is that it enables companies to pay a lower tax rate of 15% on the income earned from manufacturing specified products. This rate is lower than the previous corporate tax rate of 25% and is applicable on profits earned up to 31 March 2023. This means that companies will save 10% in taxes.
Apart from this, companies can also claim deductions under section 35AD and section 35ADB, which are related to the purchase of new plants and machinery. This will further reduce the effective tax rate and help companies increase their profits.
In addition, companies can also claim a deduction of up to Rs 1.5 crores under section 35APE for expenditure incurred on research and development activities. This will help companies to invest in research and development and gain a competitive edge in the market.
Overall, the new income tax rate of 15% is beneficial for companies engaged in the manufacturing of specified products. It will help them save money on taxes and also encourage them to invest in research and development activities. This will ultimately lead to an increase in the production of goods and services and help India achieve its goal of becoming self-reliant.
Eligibility Criteria for New Tax Rate
Section 115BAA of the Income Tax Act provides for a reduced tax rate of 10% on income from certain specified business activities. This applies to any business that has a total turnover or gross receipts up to Rs. 400 crores in the previous year.
Eligibility criteria include that the business must be a domestic company, it must be set up and registered on or after 1st April 2019 and it must not be engaged in any other business. The business must also be engaged in manufacturing any article or thing or providing services. It is also mandatory that the business must have its own place of business and should not be associated with any other business.
The business must also have its accounts audited by a Chartered Accountant and must file its return of income before the due date.
Calculation of New Income Tax Rate
Section 115BAA of the Income Tax Act, 1961 details the calculation of the new income tax rate for individuals and Hindu Undivided Families. As per this section, an individual or HUF who has a total income of up to Rs. 2.5 Lakhs will not have to pay any tax.
For those with a total income of up to Rs. 5 Lakhs, the income tax rate will be 5%. For those with income up to Rs. 7.5 Lakhs, the rate will be 10%; for incomes up to Rs. 10 Lakhs, the rate will be 15%; for incomes up to Rs. 12.5 Lakhs, the rate will be 20%; and for incomes up to Rs. 15 Lakhs, the rate will be 25%.
Individuals and HUFs with income above Rs. 15 Lakhs will have to pay 30% tax. Additionally, a surcharge of 10% is applicable for those with income over Rs. 50 Lakhs and 15% for those with income over Rs. 1 Crore. Education and higher education cess will also be applicable to the total tax amount.
FAQs on 115baa of the Income Tax Act
The following Frequently Asked Questions will give a better understanding of Section 115BAA of the Income Tax Act.�
What is Section 115baa of the Income Tax Act?
Section 115baa of the Income Tax Act provides for a concessional rate of income tax for certain incomes in the form of long-term capital gains arising from the transfer of certain specified assets.
What is the new income tax rate applicable under Section 115baa?
The new income tax rate applicable under Section 115baa is 10% of the total income, without any deductions or exemptions.
What assets are covered under Section 115baa?
Section 115baa covers long-term capital gains arising from the transfer of unlisted equity shares, units of equity-oriented funds and units of a business trust.
Who is eligible to avail of the concessional rate of income tax under Section 115baa?
Any individual, Hindu Undivided Family, or resident trust is eligible to avail of the concessional rate of income tax under Section 115baa.
When does the concessional rate of income tax under Section 115baa become applicable?
The concessional rate of income tax under Section 115baa becomes applicable from the Financial Year 2021-22.
Section 115BAA of the Income Tax Act has been introduced to provide a concessional rate of tax for certain incomes. This concessional rate of tax is a boon to companies that report income up to Rs. 400 Crores. It will help them to reduce their tax liability and save costs.
The section also provides that the companies that report a total income of more than Rs. 400 Crores will not be eligible for the concessional rate of tax. Thus, Section 115BAA of the Income Tax Act provides a concessional rate of tax and applicability to domestic companies that report income up to Rs. 400 Crores in the preceding year.
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