The following clarifications have been issued by department by inserting The Taxation Laws (Amendment) Ordinance 2019-reg.:
- Insertion of section 115JBAA:
- 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 1st April, 2019.
- In order to avail the benefit of lower tax rate of 22%, assesses has to comply the following conditions: –
- There shall not be allowed to claim any deduction or exemption under The Act;
- 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required to be exercised before the due date of filing of income tax return and once exercised cannot be subsequently withdrawn in any subsequent assessment years.
- 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:
- 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.
- 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.
- 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 02nd October, 2019.