Purpose

Form 10-IC is the go-to application for companies in India that want to choose to be taxed at a special reduced rate of 22% (plus applicable surcharge and cess) under section 115BAA of the Income-tax Act, 1961.

Overview

The Form 10IC s for domestic companies for the assessment year commencing on or after April 1, 2020.

If they meet certain conditions, these companies can calculate their income tax at a reduced rate of 22%.

But there’s a catch – they have to calculate their total income without certain deductions mentioned in the subsection. Plus, they can’t set off losses or depreciation related to those deductions.

Relevant Provision governing Form 10IC- Sec 115BAA

Applicability Applicable to domestic companies for any previous year relevant to the assessment year commencing on or after April 1, 2020.

Tax Rate Domestic companies can choose to calculate their income tax at a reduced rate of 22%, but they need to meet certain conditions mentioned in sub-section (2).

Conditions for availing concession Companies must calculate their total income without certain specified deductions. Also, any losses or depreciation related to these deductions cannot be set off.

Non-Availability of Deductions & Exemptions Companies opting for this scheme won’t be eligible for deductions like special economic zones under section 10AA, additional depreciation under Section 32, and all deductions under Chapter VI-A except Section 80JJAA.

Modification for Companies in IFSC Companies with units in the IFSC can avail of a deduction under section 80LA if they fulfill the conditions of Sec. 80LA.

How does it work? Companies have to exercise this option in the prescribed manner by the due date for filing their income tax return. Once they’ve chosen this for any previous year, it applies to future assessment years and can’t be taken back.

What if things don’t go as planned? If the companies don’t meet the conditions, the option becomes invalid for availing concessional tax scheme, for that year and onwards.

Filing requirements for Form 10-IC

Companies need to e-file Form 10-IC before the due date for filing the income tax return. Once they’ve made the choice, they can’t change their minds for that or any earlier assessment year.

What are the requirements while filing Form 10-IC?

– Company Details: Name, Residential Status, PAN, Registered Office Address, Date of Incorporation, Nature of business or activities.
– Details of IFSC Units: Name, address, and nature of activities
– Opting for section 115BA: If yes, they’ll need to file an application to withdraw from it using Form 10-IB
– Ratifying the awareness of the irrevocability of the option under section 115BAA(5)
– A confirmation that the applicant company meet the conditions under section 115BAA and will continue to meet them.

Why is Form 10-IC important?

This form is vital for domestic companies in India aiming for tax concessions under Section 115BAA. It’s their official way of applying for the reduced tax rate of 22% and making sure they meet all the criteria. Once they’ve made the choice, it sticks for all future assessment years. Getting Form 10-IC right is key for companies wanting to optimize their tax strategies.

Disclaimer:

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FORM 10-IB DEMYSTIFIED: A ROADMAP TO CONCESSIONAL TAX RATES