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January 31, 2021

What are the two forms notified by CBDT to avail the benefit of lower corporate tax?

by CA Shivam Jaiswal in Income Tax

What are the two forms notified by CBDT to avail the benefit of lower corporate tax?

Corporate tax is a direct tax applicable to all the companies registered under the companies act of India and are required to pay the corporate tax as per rate decided by the ministry of corporate affairs.

The income tax department last year had notified forms for companies to avail the reduced corporate tax rates that were announced in September last year. The Central Board of Direct Taxes (CBDT) had notified Forms 10-IC and 10-ID for existing companies that want to avail lower Income Tax rate and new manufacturing firms, respectively.

What are the lower income tax rates?

  • In September 2019, the government announced a cut in base corporate tax for existing companies to 22% from the current 30%; and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15% from the current 25%.
  • Companies opting for these new tax rates will have to forego all exemptions and incentives.
  • The effective tax rate for existing units, after considering surcharges and cess such as Swachh Bharat cess and education cess, which are levied on top of the income and corporate tax rates, would be 25.17% as compared to 34.94% now.
  • For new units, it would be 17.01% as against 29.12%.

What is Form 10-IC?

  • Companies that are operating in India and are paying corporate tax u/s 115BAB of the Income Tax Act eligible for filing Form 10-IC. 
  • Form 10-IC will have to be filed by the companies that wish to avail the beneficial rate of 22% (from the earlier 30%) upon relinquishment of the exemptions/incentives offered under the Income Tax Act.
  • The effective rate including the entire cess and surcharges like Swachh Bharat Surcharge, education cess, etc. that are levied, the aggregate percentage becomes 25.17% from 34.94%.
  • The e-Form 10-IC, which has to be furnished either under digital signature or electronic verification code (EVC), seeks general details of the company like name, PAN, registered address, date of incorporation and nature of business activities.
  • The companies will also have to declare that the option once exercised shall not be withdrawn. Besides, these companies will have to withdraw the option to be taxed at the concessional rate of 25% under the erstwhile regime.

What is Form 10-ID?

  • Form 10-ID would be filed electronically by new domestic manufacturing companies, incorporated after October 1, 2019 that wish to be taxed as per the new tax regime, that offers a concessional tax rate of 15% (from the earlier 25%), provided all the incentives and exemptions are forgone by the companies.
  • Apart from the general details, the e-form requires the companies to provide the date of commencement of manufacturing operations. Further, the companies shall have to affirm that they fulfil the stipulated conditions for availing the concessional rate and declare that the option once availed shall not be withdrawn.
  • The option once adopted cannot be dropped.

What is the due date of filing these forms?

Companies willing to adopt the new tax rates must file the forms with accurate information electronically before the due date for filing the ITR arrives. 

The forms are available on e-filing website for submission. Hence, just choosing the option in ITR would not help one opting for any of the above provision, the taxpayer will also have to file the form

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