Circular: Clarification in respect of Option Exercised under Section 115BAA of The Income Tax Act, 1961

The following clarifications have been issued by department by inserting The Taxation Laws (Amendment) Ordinance 2019-reg.:

Insertion of section 115JBAA:

1. Option has been provided to domestic companies to pay tax at a lower rate of 22% under section 115BAA of The Income Tax Act, 1961 (The Act) for any previous year beginning on or after 1^st April, 2019.
2. In order to avail the benefit of lower tax rate of 22%, assesses has to comply the following conditions: –
   1. There shall not be allowed to claim any deduction or exemption under The Act;
   2. Option is required to be exercised before the due date of filing of income tax return and once exercised cannot be subsequently withdrawn in any subsequent assessment years.
   3. Further, provision of section 115JB of The Act shall not be applicable who has exercised the option to pay tax under section 115BAA of The Act.

Clarification under section 115BAA of The Act:

1. In regard to allowability of brought forward loss on account of additional depreciation – As per clause 115BAA(2)(i) of The Act, there shall not be allowed to set off loss carried forward from any earlier assessment years.
2. In regard to allowability of brought forward MAT Credit – Similarly the tax credit of MAT paid by domestic companies exercising the option under section 115BAA of The Act shall not be available.
3. Further, a domestic company can exercise the option even after set-off the “accumulated losses and after taking the benefit of MAT Credit” as there is no time limit within which the option can be exercised.

Source: Circular No. 29/2019 dated 02^nd October, 2019.