New Corporate Income Tax Rates after Taxation Laws (Amendment) Bill, 2019

The Taxation Laws (Amendment) Bill, 2019, which seeks to amend the Income Tax Act 1961 and Finance (No. 2) Act, 2019 has been passed by the Parliament. The bill was passed by the Rajya Sabha on December 5, 2019. The Lok Sabha had passed the bill earlier on December 2. 

The bill will replace the Taxation Laws (Amendment) Ordinance, 2019 promulgated by the President on 20th September 2019 to reduce corporate tax rates. 

Introduction

Presently, the corporate tax rates are contained in the Finance (No. 2) Act, 2019 and in Section 115BA of the Income Tax Act, 1961.

The Bill has introduced to new sections – section 115BAA and section 115BAB and introduced to new corporate tax rates under those sections. These new reduced corporate tax rates are applicable from AY 2020-21 or FY 2019-20 and are applicable to domestic companies only. It is an option given to the domestic companies either to opt for new corporate tax rates or continue with the existing corporate rate of income tax.

Although the Ordinance was promulgated on 20th September 2019, the new corporate income-tax rates have been made applicable from 1st April 2020 (AY 2020-21).

The new corporate tax rates can opt only if the specified deductions including addition depreciation is not claimed by the domestic companies.

A detailed article on the topic can be found here. 

This article presents the synopsis of the corporate income tax rates for a domestic company in India for the assessment year 2020-21 (AY 2020-21).

Corporate income-tax rates for Assessment Year 2020-21

Table-1

Category of Taxpayer	Domestic Company
Total turnover or gross receipts during the previous year 2017-18 is up to Rs. 400 Crore	25%
Other Domestic Companies	30%
Domestic companies opting Sec. 115BA	25%
Minimum Alternative Tax on Book Profit	Rate of MAT
MAT on Book Profit	15%
Surcharge on Income-tax for Companies:	Rate of Surcharge
Total Income is up to Rs. 1 crore	Nil
Total Income is Rs. 1 crore to Rs. 10 crore	7%
Total Income exceeds Rs. 10 crore	12%
Health & Education Cess on Income-tax and Surcharge for Companies	In all cases covering   Table-1 above
Health & Education Cess	4%
Marginal Relief on Surcharge
Where Total Income is Rs. 1 crore to Rs. 10 crore
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Where Total Income exceeds Rs. 10 crore
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore

Corporate income-tax rates for Assessment Year 2020-21 after the amendment by the Bill

Table-2

Category of Taxpayer	Domestic Company
Domestic companies opting Sec. 115BAA	22%
Minimum Alternative Tax on Book Profit	Rate of MAT
MAT on Book Profit	0 % (Nil)
Surcharge on Income-tax for Companies:	Rate of Surcharge
Surcharge at a flat rate	10%
Health & Education Cess on Income-tax and Surcharge for Companies	In all cases covering   Table-2 above
Health & Education Cess	4%
Marginal Relief on Surcharge and MAT Credit u/s 115JAA
Not Available

Table-3

Category of Taxpayer	Domestic Company
Domestic companies opting Sec. 115BAB
Income from manufacturing activity	15%
Other Income (not specified in Chapter-XII)	22%
Excess Income from related parties	30%
STCG from non-depreciable assets	22%
Minimum Alternative Tax on Book Profit	Rate of MAT
MAT on Book Profit	0 % (Nil)
Surcharge on Income-tax for Companies:	Rate of Surcharge
Surcharge at a flat rate	10%
Health & Education Cess on Income-tax and Surcharge for Companies	In all cases covering   Table-2 above
Health & Education Cess	4%
Marginal Relief on Surcharge and MAT Credit u/s 115JAA
Not Available

Conclusion

It may be noted that the New Corporate Income Tax Rates mentioned in Table-2 and Table-3 are optional to a domestic company. If such a company does not opt for reduced New Corporate Income Tax Rates then it may continue to pay as per tax rates specified in Table-1.

Further, it may be noted that Surcharge on income-tax in Table-2 and Table-3 is applicable without any threshold limit of total income.

Chart showing Corporate Income Tax Rates after Taxation Laws (Amendment) Bill, 2019 for AY 2020-21

Domestic Companies	New tax rates after amendment				Existing tax rates before amendment and also applicable after amendment
Total Income	Companies Opt for section 115BAA		Companies Opt for section 115BAB		Companies Opt for section 115BA		Turnover upto Rs. 400 Crore in FY 2017-18		Other Companies
Upto Rs. 1 crore	25.168%		17.16%		26%		26%		31.20%
	IT	22%	IT	15%	IT	25%	IT	25%	IT	30%
	SC	10%	SC	10%	SC	0%	SC	0%	SC	0%
	Cess	4%	Cess	4%	Cess	4%	Cess	4%	Cess	4%
Above Rs. 1 crore but less than Rs. 10 crore	25.168%		17.16%		27.82%		27.82%		33.384%
	IT	22%	IT	15%	IT	25%	IT	25%	IT	30%
	SC	10%	SC	10%	SC	7%	SC	7%	SC	7%
	Cess	4%	Cess	4%	Cess	4%	Cess	4%	Cess	4%
Above Rs. 10 crore	25.168%		17.16%		29.12%		29.12%		34.944%
	IT	22%	IT	15%	IT	25%	IT	25%	IT	30%
	SC	10%	SC	10%	SC	12%	SC	12%	SC	12%
	Cess	4%	Cess	4%	Cess	4%	Cess	4%	Cess	4%

Chart showing Corporate Income Tax Rates for Minimum Alternative Tax (MAT) after Taxation Laws (Amendment) Bill, 2019 for AY 2020-21

Domestic Companies	New MAT tax rates after amendment				Existing MAT tax rates before amendment and also applicable after amendment (In case of MAT tax rate remains same irrespective of Turnover)
Total Income	Companies Opt for section 115BAA		Companies Opt for section 115BAB		Companies Opt for section 115BA		Turnover upto Rs. 400 Crore in FY 2017-18		Other Companies
Upto Rs. 1 crore	0 %		0 %		15.60%		15.60%		15.60%
	IT	0%	IT	0%	IT	15%	IT	15%	IT	15%
	SC	0%	SC	0%	SC	0%	SC	0%	SC	0%
	Cess	0%	Cess	0%	Cess	4%	Cess	4%	Cess	4%
Above Rs. 1 crore but less than Rs. 10 crore	0 %		0 %		16.692%		16.692%		16.692%
	IT	0%	IT	0%	IT	15%	IT	15%	IT	15%
	SC	0%	SC	0%	SC	7%	SC	7%	SC	7%
	Cess	0%	Cess	0%	Cess	4%	Cess	4%	Cess	4%
Above Rs. 10 crore	0 %		0 %		17.472%		17.472%		17.472%
	IT	0%	IT	0%	IT	15%	IT	15%	IT	15%
	SC	0%	SC	0%	SC	12%	SC	12%	SC	12%
	Cess	0%	Cess	0%	Cess	4%	Cess	4%	Cess	4%

Other related articles on Taxation Laws (Amendment) Bill, 2019

Understanding Amended Surcharge on Income Tax

Highlights of Key Income Tax Amendments by Taxation Laws (Amendment) Bill, 2019

Key Changes in The Taxation Laws (Amendment) Bill, 2019

Full Text of The Taxation Laws (Amendment) Bill, 2019 with Statement of Objects and Memorandum

Cabinet Approves Taxation Laws (Amendment) Bill, 2019

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