CBDT Circular No.19/2023 Dated. 23 October 2023: Due Date Extended
CBDT Circular 19/2023: Many of the domestic companies had failed to file Form No. 10 IC for AY 2021-22 within due time as required under Rule 21AE of the Income Tax Rules 962, because of genuine hardship in part of those companies in exercising the option under section 115BAA of the Income Tax Act 1961.
Representations were received by the Central Board of Direct Taxes (CBDT) to condone the delay in filing Form No. 10-IC. Considering the genuine demand of the domestic companies for the condonation of delay, in exercise of the power conferred under section. 119(2)(b) of the Act, CBDT vide this Circular No. 19/2023 dated. 23rd October 2023 has condoned the delay in filing the Form No. 10-IC for the AY 2021-22 and permitted this filing up-to 31 January 2024. in cases where the conditions stipulated below are satisfied.
Following are the three conditions stipulated by Central Board of Direct Taxes (CBDT) under this circular for the companies to make them eligible for availing the condonation of delay allowed by CBDT in filing the Form 10-IC for the AY 2021-22:
1. The return of income for relevant assessment year has been filed on or before the due date specified under section 139(1) of the Act;
2. The company must have opted for taxation u/s. 115BAA of the Act in item ( e) of “Filing Status” in “Part A-GEN” of the Return of Income in ITR-6; and
3. Form No. 10-IC is filed electronically on or before 31.01.2024 or 3 months from the end of the month in which this Circular is issued, whichever is later.
Explanatory Notes on Section 115BAA for a Clear Understanding of the Circular
Provisions under Section 115BAA of Income Tax Act 1961
The Income Tax Act, 1961 underwent an amendment in 2019 to include Section 115BAA, which provides a lowered corporate tax rate to domestic companies. These companies can pay the tax at a rate of 22% in addition to the surcharge of 10% and 4% cess under this Section. This implies that these companies can choose to not pay the minimum alternate tax in case they decide to pay the tax under this scheme.
This tax rate came into effect from the financial year 2019-2020. According to this section, the income tax payable with respect to a company’s total income, for any previous financial year in relevance to the assessment year which begins on or after 1st April 2020, will be computed at 22%, if all the conditions mentioned under sub-section (2) of Section 115BAA are satisfied.
If the corporation is not able to comply with these conditions in any previous financial year, this option stands invalid for the current and the subsequent assessment years. In order to opt for this reduced tax rate, companies are required to file Form 10-IC as per the Rule 21 AE of the Income Tax Rules 1962.
Eligibility Criteria for Income Tax Section 115BAA for Domestic Companies
Domestic corporations can opt for income tax benefits reduced tax rate under Section 115BAA of Income Tax Act 1961. But they need to meet specific criteria to qualify for these advantages. To be eligible, corporations must adhere to the following conditions as stipulated under Rule 21AE of Income Tax Rules 1962.
1. Exemption Limitations:
Corporations choosing to pay tax under Section 115BAA cannot avail themselves of other exemptions or incentives provided by different sections of the Income Tax Act, 1961. They must calculate their total income without claiming the following deductions:
- Deductions available for corporations established in special economic zones under Section 10AA.
- Deductions under Section 33AB for corporations engaged in rubber, tea, or coffee.
- Deductions under Section 32, including investment allowances under Section 32AD for new machinery or plants in specific backward regions like Telangana, West Bengal, Bihar, and Andhra Pradesh.
- Deductions under Section 35AD for capital expenses in specific businesses.
- Deductions under Section 35 for expenditures related to scientific research at certain universities.
- Deductions for deposits made by corporations involved in fossil fuel extraction to a designated site restoration fund according to Section 33ABA.
- Deductions covered in Chapter VI-A for specific incomes, including sections like 80AC, 80IB, 80IAC, 80IA, and more. This also includes exceptions related to deductions in sections 80M and 80JJAA.
- Deductions under Section 35CCC for skill development or agricultural extension projects.
- Any carry-forward of depreciations or losses from the previous financial year, as mentioned above.
- Losses carried forward due to the amalgamation of certain companies or deductions from the amalgamating company aligned with the above deductions.
2. Set Off for Losses:
Corporations cannot claim set-offs for the losses mentioned above if they choose the new tax rates under Section 115BAA.
3. Opt-in Deadline:
Domestic corporations must choose this tax regime on or before the last date for filing their income tax returns. It’s important to note that this choice is irrevocable and cannot be changed once selected.
4. Turnover Flexibility:
There are no restrictions based on the turnover of a domestic corporation.
5. Applicability for All:
Both existing and new companies have the option to select taxation under Section 115BAA.
Brief Note on Rule 21AE
Rule 21AE was introduced by CBDT by the 4th amendment in I-T rules brought on 12th February 2020. Following are the provisions under Rule 21AE:
(1) The option to be exercised in accordance with the provisions of sub-section (5) of section 115BAA by a person, being a domestic company, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2020, shall be in Form No. 10-IC.
(2) The option in Form No. 10-IC shall be furnished electronically either under digital signature or electronic verification code.
(3) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall-
(i) specify the procedure for filing of Form No. 10-IC;
(ii) specify the data structure, standards and manner of generation of electronic verification code, referred to in sub-rule (2), for verification of the person furnishing the said Form; and
(iii) be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the Form so furnished.
To Access the CBDT Circular No.19/2023 CLICK HERE
To Access the CBDT Circular No.18/2023 CLICK HERE
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