Section 115BAA lets any domestic company pay income tax at a flat 22% (base), instead of the regular 25%/30% slabs. After a flat 10% surcharge and 4% Health & Education Cess the effective rate is 25.168%. In return the company gives up specified deductions and incentives, cannot use accumulated MAT credit, and MAT under Section 115JB no longer applies. The option is exercised via Form 10-IC and is irrevocable. Foreign companies are not eligible.
115BAA vs Regular Corporate Tax
How the 22% concessional rate compares with the regular company slabs for AY 2026-27 (all-in figures include surcharge and 4% cess). See the full corporate tax rate guide for the regular regime.
| Company / scenario | Base rate | Effective (all-in) | Under 115BAA |
|---|---|---|---|
| Domestic co. — turnover ≤ ₹400 cr | 25% | ~26.00% | 25.168% |
| Domestic co. — turnover > ₹400 cr | 30% | ~34.94% | 25.168% |
| New manufacturing co. (115BAB) | 15% | ~17.16% | Use 115BAB |
| MAT under regular regime | 15% of book profit | ~17.16% | MAT nil |
| Foreign company | 35%* | ~38.22% | Not eligible |
* Foreign-company base rate cut to 35% from 40% by Finance (No.2) Act 2024. 115BAA is for domestic companies only.
22% base + 10% flat surcharge = 24.2%, then + 4% cess = 25.168%. The 10% surcharge is flat at every income level — there is no 7%/12% progressive slab — so the all-in rate stays 25.168% whatever the company earns.
Deductions You Must Give Up
The lower rate comes at a price: a company opting for 115BAA cannot claim the following deductions and incentives, nor set off losses/depreciation attributable to them.
| Deduction / credit | Section | Under 115BAA |
|---|---|---|
| Investment-linked deductions (80IA, 80IB, 80IC, 80IE) | Chapter VI-A | Not allowed |
| Additional depreciation on new plant & machinery | 32(1)(iia) | Not allowed |
| Investment allowance for new assets | 32AD | Not allowed |
| SEZ unit deduction | 10AA | Not allowed |
| Weighted scientific-research deduction | 35(2AB) | Actual exp. only |
| Capital expenditure — specified business | 35AD | Not allowed |
| Accumulated MAT credit | 115JAA | Lapses |
| Donations under 80G | 80G | Not allowed |
| Normal depreciation (WDV) | 32 | Allowed |
| New-employee deduction | 80JJAA | Allowed |
| Employer NPS contribution | 80CCD(2) | Allowed |
| Business expenses (rent, salary, interest) | 36 / 37 | Allowed |
Regular depreciation, ordinary business expenditure, 80JJAA and 80CCD(2) survive; the incentive-linked deductions do not.
Not sure whether 115BAA beats your current deductions? Get a multi-year tax model.
Talk to a CA →No MAT — but MAT Credit Lapses
Companies under 115BAA are outside Minimum Alternate Tax (Section 115JB) entirely — a real benefit for firms with high book profits but low taxable income. The catch: any MAT credit carried forward under Section 115JAA is lost the moment you opt in. If you hold large MAT credits, it is often worth staying in the regular regime until they are used up.
The option is irrevocable and MAT credit lapses on entry. Companies with SEZ (10AA) deductions, investment-linked incentives or big MAT credits should run a 3-5 year model first — the 22% rate may cost more than it saves in the early years.
115BAA vs Regular — ₹5 crore Profit
Regular regime (30% co.)
Section 115BAA (22%)
On a clean ₹5 crore profit with no special deductions, 115BAA saves roughly ₹41 lakh — an effective 25.168% versus about 33.4%. The saving shrinks or reverses if the company was claiming large incentive deductions in the regular regime.
Section 115BAA vs Section 115BAB
115BAA — all domestic cos
- Any domestic company, incorporated any time
- Effective 25.168% (flat 10% surcharge)
- No fresh-manufacturing condition
- Opt via Form 10-IC · irrevocable
115BAB — new manufacturers
- New manufacturing co. incorporated on/after 1 Oct 2019
- Effective 17.16% (flat 10% surcharge)
- Must start fresh manufacturing; no used P&M
- Opt via Form 10-ID · irrevocable
If a company qualifies as a new manufacturer it should prefer Section 115BAB (15%). Everyone else — service companies, older firms, traders — uses 115BAA. Both exclude MAT and both are one-way doors. See the full corporate tax rate comparison.
Exercising the Option — Form 10-IC
- File Form 10-IC electronically on incometax.gov.in on or before the Section 139(1) return due date of the first year you opt.
- The option applies from that assessment year and every year after — it is irrevocable.
- Report the concessional rate in ITR-6; missing Form 10-IC can cause the benefit to be denied (CBDT has condoned delays in past years).
- Pay advance tax on the 22% basis for the year of opting.
Opt for 115BAA if
- You claim few or no Chapter VI-A / incentive deductions
- You are on the 30% slab (turnover above ₹400 cr)
- You have little or no MAT credit to lose
- You want a flat, predictable 25.168% rate
Stay in regular regime if
- You have large SEZ (10AA) or 80-IA/IB deductions running
- You hold big accumulated MAT credit
- You have brought-forward incentive-linked losses
- You are a new manufacturer (use 115BAB at 15%)
Section 115BAA — Frequently Asked Questions
Related TaxClue services
Should Your Company Opt for 115BAA?
The 22% option is irrevocable and MAT credit lapses on entry. TaxClue's CA-led team models 115BAA vs 115BAB vs the regular regime over 3-5 years, files Form 10-IC and handles your ITR-6 — 100% online, across India.