CBDT notifies forms for firms to avail lower corporate taxes

The move comes after the government had slashed corporate tax rate last year in September as a measure to boost economic activity. The base corporate tax for existing companies was brought down to 22% from the current 30% while for new manufacturing firms, the tax was reduced to 15 per cent from the current 25 per cent.

The income tax (I-T) department has 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) has notified Forms 10-IC and 10-ID for existing companies that want to avail lower I-T rate and new manufacturing firms, respectively.

In September 2019, the government announced a cut in base corporate tax for existing companies to 22 per cent from the current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15 per cent from the current 25 per cent. 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, will be 25.17 per cent as compared to 34.94 per cent now. For new units, it will be 17.01 per cent as against 29.12 per cent now.

Form 10-IC will have to be filed by the companies that wish to avail the beneficial rate of 22 per cent upon relinquishment of the exemptions/incentives offered under the Income Tax Act.

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The companies will also have to declare that the option once exercised shall not be withdrawn.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 per cent under the erstwhile regime.

Similarly, 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 per cent, 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.

Nangia Andersen Consulting Director Shailesh Kumar said companies desirous of availing the new tax regime shall have to file the forms electronically, before the due date of filing of return for AY 2020-21, i.e September 30, 2020.

"The Forms have been notified in a timely manner and the companies have sufficient time to evaluate their options and file their consent accordingly,” Kumar said.