Section 115BA gives a domestic company the option to pay tax at twenty-five per cent for any previous year relevant to the assessment year beginning on or after 1 April 2017. Three conditions apply. The company must have been set up and registered on or after the 1st day of March, 2016. It must not be engaged in any business other than manufacture or production of an article or thing, and research in relation to, or distribution of, what it manufactures or produces.
Third, total income must be computed without the deductions under s. 10AA, s. 32(1)(iia), s. 32AC, s. 32AD, s. 33AB, s. 33ABA, s. 35(1)(ii), (iia) and (iii), (2AA) and (2AB), s. 35AC, s. 35AD, s. 35CCC, s. 35CCD, and Part C of Chapter VI-A other than s. 80JJAA. It must also be computed without set-off of losses brought forward that are attributable to those deductions, and with depreciation under s. 32 determined in the prescribed manner.
Operative consequences
A loss attributable to the forgone deductions is deemed to have been given full effect and cannot be claimed in any later year (s. 115BA(3)).
The option must be exercised in the prescribed manner on or before the due date under s. 139(1) for the first return the company is required to furnish.
Once exercised, the option cannot be withdrawn for that or any later year, except where the company exercises the option under s. 115BAA.
Status
Section 115BA is operative for AY 2026-27. The Finance Act, 2026 does not amend it.
s. 199 re-enacts the option at 25%, listing the forgone deductions by reference to s. 205(1)(a) to (g). By s. 536(2)(f), an option in force under the 1961 Act is deemed to be an option exercised under the corresponding provision of the 2025 Act.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 199.
Case Laws & Commentary
SECTION 115BA — TAX ON INCOME OF CERTAIN MANUFACTURING DOMESTIC COMPANIES
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BA offers a domestic company set up and registered on or after 1 March 2016 and engaged in the business of manufacture or production of any article or thing (and research/distribution incidental thereto) the option to be taxed at a concessional rate of twenty-five per cent, in place of the normal corporate rate, subject to the condition that it does not claim specified incentive deductions/accelerated depreciation. The option is exercised by filing the prescribed Form 10-IB on or before the due date for furnishing the return, and once exercised cannot be withdrawn for any subsequent year.
Section 115BA was the first of the trio of concessional manufacturing/company regimes (115BA, 115BAA, 115BAB). With the introduction of section 115BAA (22%, without the new-company/manufacturing restriction) and section 115BAB (15% for new manufacturers), section 115BA has been largely superseded in practice, and the section was amended to allow a company that had opted under it to migrate to section 115BAA or 115BAB.
A.2 Sub-section / clause taxonomy
Sub-section (1): the 25% charge, subject to the other provisions of the Chapter and the conditions in sub-section (2). Sub-section (2): conditions - incorporation on or after 1 March 2016; engaged only in manufacture/production (and incidental activities); total income computed without specified deductions (e.g. sections 10AA, 32(1)(iia), 32AD, 35 enhanced, Chapter VI-A heading 'C' deductions other than 80JJAA) and without set-off of related losses. Sub-section (3): consequences of set-off claims. Sub-section (4): exercise of option in the prescribed manner (Form 10-IB) by the return due date, irrevocable; and the migration route to sections 115BAA/115BAB.
A.3 Core doctrinal themes
Theme (1) - Concession for the price of incentives: the 25% rate is available only if the company forgoes the listed incentive deductions and accelerated depreciation.
Theme (2) - Procedural condition is substantive: the option must be exercised through Form 10-IB by the return due date and is irrevocable - timeliness is a recurring compliance pressure-point.
Theme (3) - Superseded but migratable: with 115BAA/115BAB available, a 115BA company may migrate to those regimes; the practical relevance of 115BA is now residual.
Inserted by the Finance Act, 2016 (w.e.f. AY 2017-18) for new manufacturing domestic companies. Following the Taxation Laws (Amendment) Act, 2019 introducing sections 115BAA and 115BAB, section 115BA was amended to permit migration to those regimes; in practice most eligible companies now opt for 115BAA (22%) or 115BAB (15%).
Finance Act 2026: no amendment to section 115BA. The 25% optional regime continues for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) For most companies, compare 115BA (25%) with 115BAA (22%) and 115BAB (15%) - the latter two are usually more beneficial. (2) If 115BA is chosen, file Form 10-IB by the return due date; the option is irrevocable. (3) Ensure none of the prohibited incentive deductions/accelerated depreciation is claimed, or the option fails. (4) Consider migrating an existing 115BA company to 115BAA/115BAB.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BA is NOT amended by the Finance Act, 2026. The optional 25% regime for eligible manufacturing domestic companies (with the migration route to sections 115BAA/115BAB) continues for AY 2026-27 onward.
C. CASE LAW - CLUSTERED BY ISSUE
Cluster C-1 : Timeliness of the option (read with the cognate Form 10-IC jurisprudence)
The Form 10-IB/option-timeliness question (cognate to the Form 10-IC condonation line under section 115BAA).
Principle: The concessional regime is accessed only by a timely, validly-exercised option in the prescribed Form by the return due date. The Tribunals and the CBDT have, in the cognate context of Form 10-IC (section 115BAA), treated a delay in filing the procedural form as a condonable, directory default where the substantive choice was clearly made in the return - a forgiving approach the practitioner can invoke by analogy for Form 10-IB.
Relevance: Fixes the central compliance risk under section 115BA and points to the condonation relief developed in the section 115BAA context as the route where the form is filed late.
Candid note on the case-law field: Section 115BA, being largely superseded by sections 115BAA/115BAB, has a thin dedicated case-law field; the live jurisprudence is the cognate Form 10-IC condonation line under section 115BAA (see that file). The position is stated candidly; no decision has been invented under section 115BA.
D. PRACTITIONER'S NOTE
Treat section 115BA as a legacy option: in almost all cases sections 115BAA (22%) or 115BAB (15%) are preferable. If 115BA is in play, the entire risk is procedural - file Form 10-IB by the return due date, forgo the prohibited incentives, and consider migrating to the newer regimes.
E. SOURCES & CITATIONS
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. Verify the current statutory text, the prescribed forms and the latest CBDT/appellate position before relying on any proposition.
Function in the statutory architecture
Section 115BA gives a domestic company the option to pay tax at twenty-five per cent for any previous year relevant to the assessment year beginning on or after 1 April 2017. Three conditions apply. The company must have been set up and registered on or after the 1st day of March, 2016. It must not be engaged in any business other than manufacture or production of an article or thing, and research in relation to, or distribution of, what it manufactures or produces.
Third, total income must be computed without the deductions under s. 10AA, s. 32(1)(iia), s. 32AC, s. 32AD, s. 33AB, s. 33ABA, s. 35(1)(ii), (iia) and (iii), (2AA) and (2AB), s. 35AC, s. 35AD, s. 35CCC, s. 35CCD, and Part C of Chapter VI-A other than s. 80JJAA. It must also be computed without set-off of losses brought forward that are attributable to those deductions, and with depreciation under s. 32 determined in the prescribed manner.
Operative consequences
Status
Section 115BA is operative for AY 2026-27. The Finance Act, 2026 does not amend it.
s. 199 re-enacts the option at 25%, listing the forgone deductions by reference to s. 205(1)(a) to (g). By s. 536(2)(f), an option in force under the 1961 Act is deemed to be an option exercised under the corresponding provision of the 2025 Act.
The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject the 2025 Act provision is s. 199.
Case Laws & Commentary
SECTION 115BA — TAX ON INCOME OF CERTAIN MANUFACTURING DOMESTIC COMPANIES
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
A. SECTION COMMENTARY
A.1 Structural position & legislative purpose
Section 115BA offers a domestic company set up and registered on or after 1 March 2016 and engaged in the business of manufacture or production of any article or thing (and research/distribution incidental thereto) the option to be taxed at a concessional rate of twenty-five per cent, in place of the normal corporate rate, subject to the condition that it does not claim specified incentive deductions/accelerated depreciation. The option is exercised by filing the prescribed Form 10-IB on or before the due date for furnishing the return, and once exercised cannot be withdrawn for any subsequent year.
Section 115BA was the first of the trio of concessional manufacturing/company regimes (115BA, 115BAA, 115BAB). With the introduction of section 115BAA (22%, without the new-company/manufacturing restriction) and section 115BAB (15% for new manufacturers), section 115BA has been largely superseded in practice, and the section was amended to allow a company that had opted under it to migrate to section 115BAA or 115BAB.
A.2 Sub-section / clause taxonomy
Sub-section (1): the 25% charge, subject to the other provisions of the Chapter and the conditions in sub-section (2). Sub-section (2): conditions - incorporation on or after 1 March 2016; engaged only in manufacture/production (and incidental activities); total income computed without specified deductions (e.g. sections 10AA, 32(1)(iia), 32AD, 35 enhanced, Chapter VI-A heading 'C' deductions other than 80JJAA) and without set-off of related losses. Sub-section (3): consequences of set-off claims. Sub-section (4): exercise of option in the prescribed manner (Form 10-IB) by the return due date, irrevocable; and the migration route to sections 115BAA/115BAB.
A.3 Core doctrinal themes
Theme (1) - Concession for the price of incentives: the 25% rate is available only if the company forgoes the listed incentive deductions and accelerated depreciation.
Theme (2) - Procedural condition is substantive: the option must be exercised through Form 10-IB by the return due date and is irrevocable - timeliness is a recurring compliance pressure-point.
Theme (3) - Superseded but migratable: with 115BAA/115BAB available, a 115BA company may migrate to those regimes; the practical relevance of 115BA is now residual.
A.4 Legislative evolution / Finance Act amendment trail
Inserted by the Finance Act, 2016 (w.e.f. AY 2017-18) for new manufacturing domestic companies. Following the Taxation Laws (Amendment) Act, 2019 introducing sections 115BAA and 115BAB, section 115BA was amended to permit migration to those regimes; in practice most eligible companies now opt for 115BAA (22%) or 115BAB (15%).
Finance Act 2026: no amendment to section 115BA. The 25% optional regime continues for AY 2026-27 onward.
A.5 CA practitioner pointers
(1) For most companies, compare 115BA (25%) with 115BAA (22%) and 115BAB (15%) - the latter two are usually more beneficial. (2) If 115BA is chosen, file Form 10-IB by the return due date; the option is irrevocable. (3) Ensure none of the prohibited incentive deductions/accelerated depreciation is claimed, or the option fails. (4) Consider migrating an existing 115BA company to 115BAA/115BAB.
B. FINANCE ACT, 2026 - IMPACT NOTE
Section 115BA is NOT amended by the Finance Act, 2026. The optional 25% regime for eligible manufacturing domestic companies (with the migration route to sections 115BAA/115BAB) continues for AY 2026-27 onward.
C. CASE LAW - CLUSTERED BY ISSUE
Cluster C-1 : Timeliness of the option (read with the cognate Form 10-IC jurisprudence)
The Form 10-IB/option-timeliness question (cognate to the Form 10-IC condonation line under section 115BAA).
Principle: The concessional regime is accessed only by a timely, validly-exercised option in the prescribed Form by the return due date. The Tribunals and the CBDT have, in the cognate context of Form 10-IC (section 115BAA), treated a delay in filing the procedural form as a condonable, directory default where the substantive choice was clearly made in the return - a forgiving approach the practitioner can invoke by analogy for Form 10-IB.
Relevance: Fixes the central compliance risk under section 115BA and points to the condonation relief developed in the section 115BAA context as the route where the form is filed late.
Candid note on the case-law field: Section 115BA, being largely superseded by sections 115BAA/115BAB, has a thin dedicated case-law field; the live jurisprudence is the cognate Form 10-IC condonation line under section 115BAA (see that file). The position is stated candidly; no decision has been invented under section 115BA.
D. PRACTITIONER'S NOTE
Treat section 115BA as a legacy option: in almost all cases sections 115BAA (22%) or 115BAB (15%) are preferable. If 115BA is in play, the entire risk is procedural - file Form 10-IB by the return due date, forgo the prohibited incentives, and consider migrating to the newer regimes.
E. SOURCES & CITATIONS
Caveat: Treatise-style commentary for practitioners and academic use; not legal opinion. Verify the current statutory text, the prescribed forms and the latest CBDT/appellate position before relying on any proposition.