The President of India has implemented the Taxation Laws (Amendment) Ordinance, 2019 on November 20, 2019 to make some important changes in the Income-tax Act, 1961.
The key changes were as follows:
Changes in Section 115BAB
- Income from manufacturing activities shall be taxable with reduced rate i.e. 15%.
- The short-term capital gains arising from non-depreciable assets shall be taxable at 22%. Whereas short-term capital gains arising from transfer of depreciable asset shall taxed at the rate of 15%.
- Following businesses are proposed to excluded from the scope of section 115BAB.
- Development of computer software in any form or in any media;
- Mining; and Conversion of marble blocks or similar items into slabs;
- Bottling of gas into cylinder;
- Printing of books or production of cinematograph film
- Amalgamated company can opt for Section 115BAB if the scheme of amalgamation is not falling within the purview of ‘Splitting or reconstruction of existing businesses. However, the successor company shall not be allowed to set-off any loss or depreciation if such loss or depreciation is attributable to prohibited deduction or allowances as specified in Section 115BAB.
- Where A.O. finds that the eligible company earns more than ordinary profits due to related party transaction then the excess profit shall be taxed at the rate of 30%.
Changes in Section 115BAA:
- Option to pay tax at concessional rate shall become invalid for the year and for all subsequent assessment years, if company does not compute its total income as per section 115BBA.
- Company not be allowed to set-off the losses attributable to additional deduction under section 32AD
- In case of amalgamation or demerger, the successor co. not allowed to set-off any loss or depreciation if such loss or depreciation is attributable to prohibited deduction as specified in Section 115BAA.
- Units located in IFSCs (Indian Financial System Codes) can claim deduction under Section 80LA.
- Adjustment can be made to WDV of the block of assets to set-off the unabsorbed depreciation attributable to additional depreciation because company opting for section 115BAA are not eligible to claim the same.
Forfeiture of MAT Credit:
- Vide CBDT circular No. 29/2019, dated 02-10-2019, it has been clarified that the MAT credit shall be not available if a company opts for new regimes.
- The Bill proposes an amendment to Section 115JAA that this provision shall not be applicable to a company opting for new tax regimes of Section 115BAA or 115BAB.