Section 200 of the Income-tax Act, 2025 allows a domestic company to opt for income-tax at 22% on total income computed without specified deductions and without set off of losses attributable to them. The option must be exercised by the section 263(1) due date and cannot be withdrawn.
What section 200 does
Section 200 is the concessional company regime — the successor to section 115BAA of the Income-tax Act, 1961. It offers a 22% rate to a domestic company, at its option, in exchange for giving up a defined list of deductions and the losses attributable to them.
The bargain is set out in sub-section (1). Total income must be computed without deductions under section 45(2) or 47(1)(b), without Chapter VIII deductions other than sections 146 and 148, and without the sections specified in section 205(1)(a) to (g) — and without set off of any carried forward loss or depreciation attributable to those deductions.
Two features make the choice consequential. The option must be exercised on or before the section 263(1) due date for the return, and once exercised it cannot be withdrawn for that or any subsequent year. And if the conditions are breached, sub-section (2) makes the option invalid for that year and all subsequent years.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 115BAA(1) | 22% rate on giving up specified deductions | 200(1) |
| 115BAA(2) | Failure to satisfy conditions invalidates the option | 200(2) |
| 115BAA(3) | Loss and depreciation deemed fully given effect to | 200(3) |
| 115BAA(3), proviso | IFSC unit — section 80LA deduction preserved | 200(4) with 147 |
| 115BAA(5) | Option by the return due date, applies to later years | 200(5) |
| 115BAA(5), proviso | Option cannot be withdrawn | 200(6) |
| 115JB(5A) | MAT not applicable to this regime | 206 |
Section 200 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the rate and the price
Irrespective of anything in the Act but subject to Parts A, B, E and this Part of Chapter XIII (other than sections 199 and 201), income-tax is payable at 22%, at the option of a domestic company, on total income computed: (a) without any deduction under section 45(2) or 47(1)(b), under Chapter VIII other than sections 146 and 148, or under the sections specified in section 205(1)(a) to (g); (b) without set off of carried forward loss or depreciation attributable to those deductions; and (c) without set off of loss or unabsorbed depreciation deemed so under section 116 if attributable to them.
What survives — sections 146 and 148
Two Chapter VIII deductions are expressly preserved: section 146 (additional employee cost, the old section 80JJAA) and section 148 (inter-corporate dividends, the old section 80M). A company on the 22% regime can still claim both, which materially affects the comparison for employers and holding companies.
Sub-sections (2) and (3) — breach and the treatment of losses
If the company fails to satisfy the requirements in any tax year, the option becomes invalid for that year and subsequent years, and the Act applies as if it had never been exercised. And the losses and depreciation referred to in clauses (1)(b) and (c) are deemed to have been given full effect to, so no further deduction for them is allowed in any subsequent year — they are extinguished, not deferred.
Sub-section (4) — the IFSC carve-out
For a company having a Unit in an International Financial Services Centre which has exercised the option, the requirements in sub-section (1) are modified so that the deduction under section 147 — the successor to section 80LA — remains available, subject to that section's conditions.
Sub-sections (5) and (6) — the option is a one-way door
The section does not apply unless the option is exercised in the prescribed manner on or before the due date under section 263(1) for furnishing the return, and once exercised it applies to subsequent tax years. Sub-section (6) provides that once exercised for any tax year, it cannot subsequently be withdrawn for that or any other year.
The other concessional regimes
Section 199 carries the old section 115BA regime for certain manufacturing companies; section 201 the old 115BAB regime for new manufacturing companies; section 203 and section 204 the co-operative society regimes under 115BAD and 115BAE. Common conditions for all of them sit in section 205.
Worked example
A domestic company for tax year 2026-27.
| Item | Under section 200 | Outside section 200 |
|---|---|---|
| Rate of tax | 22% | As per the Finance Act for a domestic company |
| Brought-forward loss attributable to a Part C deduction | Not available, and deemed fully given effect to under sub-section (3) | Available under section 112 |
| Deduction for additional employee cost under section 146 | Available | Available |
| Deduction for inter-corporate dividend under section 148 | Available | Available |
| Other Chapter VIII Part C deductions | Not available | Available |
| Minimum alternate tax under section 206 | Read section 206 for its application to this regime | Applies |
| Withdrawal of the option | Not possible — sub-section (6) | — |
The decisive question in practice is the third row from the bottom. A company sitting on large carried-forward losses attributable to profit-linked deductions loses them permanently on opting in — sub-section (3) deems them fully given effect to. The 22% saving has to outweigh that, permanently, because the option cannot be withdrawn.
Note also the timing: the option must be exercised on or before the section 263(1) due date. A company that files late cannot exercise it for that year.
Compliance checklist and due dates
- Model the regime over several years before opting; sub-section (6) makes the choice irrevocable.
- Quantify carried-forward losses and depreciation attributable to the surrendered deductions — sub-section (3) extinguishes them.
- Exercise the option in the prescribed manner on or before the section 263(1) due date.
- Remember that section 146 and section 148 deductions survive the regime.
- For an IFSC unit, confirm the section 147 deduction is preserved under sub-section (4).
- Monitor compliance every year — a breach under sub-section (2) invalidates the option for that year and all subsequent years.
- Read the common conditions in section 205 alongside this section.
Common mistakes
- Opting in without valuing the carried-forward losses that will be permanently lost.
- Assuming the option can be reversed in a later year; sub-section (6) rules it out.
- Missing the section 263(1) deadline for exercising the option.
- Overlooking that sections 146 and 148 remain available, and therefore understating the regime's value.
- Treating a breach as affecting only the year of breach; sub-section (2) carries it into all subsequent years.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.