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Salient features of
Provisions
 in Income Tax for
Reduced Rate
 of Tax for
 New Companies

Sunil Arora & Associates
Chartered Accountants


TO GIVE BOOST TO MANUFACTURING
ACTIVITY IN INDIA, THE FINANCE MINISTER
HAS ANNOUNCED REDUCTION
IN RATE OF INCOME TAX TO 15% FOR CERTAIN
COMPANIES, WHICH FULFILL THE
FALLOWING CONDITIONS:





  1. Tax rate of 15% to be applicable for the F.Y. 2019-20 onwards.
  2. Reduced rate of tax applicable only for companies incorporated after 1st October, 2019.
  3. Concessional rate of 15% is applicable only in case of domestic company.
  4. Benefit of reduced rate of tax is available only to a manufacturing company.
  5. Company wanting to avail the benefit must commence manufacturing on or before 31.03.2023.
  6. The company/ business should not be formed by splitting up or reconstruction of business already in existence.
  7. The company/ manufacturing facility should not use plant & machinery which has already been used for some purpose in India.
  8. In other words the manufacturing activity should be carried out in the company with new plant & machinery.
  9. Exception to the extent of 20% of the total value of plant & machinery has been provided to the aforesaid condition. Implying there by that old / used plant & machinery upto 20% of the total value.
  10. The company should not use any building which was previously used as a ‘hotel’ or a ‘ commercial centre’ as referred to in Section 80ID.
  11. Further the company cannot engage in any other activity, other than as described hereunder:
  12. Manufacturing of any article or thing
  13. Research in relation to such article or thing
  14. Distribution of such article or thing.
  15. In other words a company trying to avail benefit of lower rate of tax of 15% should not combine any other activity with the manufacturing activity of the company.
  16. The company will not be entitled to various deduction provided in section 10AA, 32AD etc as well as chapter VI A of the Act.
  17. The company would also not be able to claim additional depreciation @ 20% as provided u/s 32(i) (ii a) of the Act.
  18. The company would be entitled to depreciation u/s 32(i) (ii) as determined in the manner as may be prescribed.
  19. The central government may come up with a structure of depreciation which may be different from the normal depreciation as presently provided in the statute.
  20. The company will have to exercise option to be taxed under this provision before the due date of filing of ITR u/s 139(1) for the first year and the same would be valid for all the subsequent years.
  21. Statute further provides that once thus option is exercised the same cannot be withdrawn for any year.
  22. The benefit of lower tax is available to the companies manufacturing any article or thing including items listed in thirteenth sch
 
     
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