India’s corporate tax regime has undergone major reforms in the past few years. Among them, Section 115BAA offered domestic companies a lower tax rate with no exemptions—a game-changer in 2019. But as we move into Financial Year 2025–26, many companies are now re-evaluating:
Is 115BAA still the most tax-efficient route?
This blog breaks down current corporate tax options, compares 115BAA with other schemes, and tells you when it’s worth opting in—or staying out.
Legal Reference
- Section 115BAA, Income Tax Act, 1961
- Introduced via Taxation Laws (Amendment) Act, 2019
- Available to all domestic companies except those availing other special tax regimes (e.g., 115BAB, 115BA)
What is Section 115BAA?
It allows domestic companies to pay tax at a flat 22%, plus applicable surcharge and cess, without claiming any exemptions or incentives.
Effective tax rate:
- 22% + 10% surcharge + 4% cess = 25.17%
Key conditions:
- No MAT (Minimum Alternate Tax) applicable
- Company must opt in by filing Form 10-IC before the due date of filing return under Section 139(1)
- Once opted in, the choice is irreversible
Comparative Snapshot: FY 2025–26 Tax Options
| Tax Regime | Base Rate | Effective Rate | Key Features |
|---|---|---|---|
| Normal Scheme | 25% / 30% | 26%–34.94% | Old structure with exemptions |
| 115BAA | 22% | 25.17% | No exemptions, no MAT |
| 115BAB (new mfg. co.) | 15% | 17.16% | Only for new mfg units till Mar 2024 |
Who Should Choose Section 115BAA in FY 2025–26?
Best for Companies That:
- Are not claiming R&D deduction, SEZ, or accelerated depreciation
- Have low carried-forward losses from earlier years
- Are newly incorporated or recently restructured
- Are looking for long-term rate stability
May Not Be Ideal For:
- Companies using Section 35(2AB) R&D deductions
- Businesses operating in SEZs (Section 10AA)
- Those with large brought-forward MAT credits
- Entities relying on Section 80-IA to 80-IE benefits
Case Study: Tax Cost Comparison
Company A (with no exemptions):
- Net taxable income: ₹2 crore
- Under normal regime (25% base rate):
Tax = ₹2,00,00,000 × 26% = ₹52,00,000 - Under 115BAA:
Tax = ₹2,00,00,000 × 25.17% = ₹50,34,000
Saving: ₹1,66,000
Company B (with ₹30 lakh deductions from R&D and depreciation):
- Better off in normal regime where such deductions apply
Important Deadlines & Forms
- File Form 10-IC before the due date under Section 139(1)
- Once exercised, Section 115BAA is irreversible for life
- Companies switching from normal regime must prepare a reconciliation of deferred tax assets/liabilities
Conclusion
Section 115BAA continues to offer a low, stable, and simple tax rate for most domestic companies—but it’s not a one-size-fits-all. The decision to opt-in should be based on detailed forecasting of exemptions, future profits, and historical losses. A quick tax saving now could lead to long-term missed benefits.
Call to Action and Disclaimer
Need help evaluating if 115BAA is right for your company in FY 2025–26?
Schedule a meeting with our Chartered Accountant, Anshul Goyal, by visiting:
Disclaimer: I am Anshul Goyal, a Chartered Accountant licensed with ICAI, India. This blog is for educational purposes only and not a substitute for professional advice.
Frequently Asked Questions
1. Can I switch back from Section 115BAA to the old scheme?
No. Once opted, 115BAA is irreversible.
2. Is MAT applicable under 115BAA?
No, MAT is not applicable for companies under 115BAA.
3. Do companies under 115BAA get depreciation benefits?
Yes, but only normal depreciation—not additional or accelerated depreciation.
4. What is the last date to file Form 10-IC?
It must be filed before the due date of return under Section 139(1).
5. Should startups choose 115BAA?
If they’re not claiming Section 80-IAC or R&D deductions, yes—115BAA is often ideal.