Explanation
Section 115BAA, introduced from FY 2019-20, allows any existing domestic company to opt for a flat 22% income tax rate instead of the standard 30% rate. After adding the mandatory 10% surcharge and 4% health and education cess, the effective rate is 25.17%. To opt in, the company must forego deductions under §80IA, §80IB, §80IC, §80IE, additional depreciation under §32(1)(iia), §35AD capital expenditure deduction, and the §10AA SEZ unit exemption, among others. Minimum Alternate Tax (MAT) under §115JB does not apply to companies opting under §115BAA. The option is exercised by filing Form 10-IC on or before the due date of the return for the first year in which the option is to be exercised. Critically, once a company opts into §115BAA it cannot revert to the old regime — the choice is permanent. This regime suits companies with minimal eligible deductions for whom the rate reduction outweighs the loss of deductions. Verify on the income-tax portal before filing.