Section 200 — Domestic Company 22pc Concessional | ITA 2025

Section 200 — - DOMESTIC COMPANY CONCESSIONAL 22% REGIME

Section 200 is the substantive equivalent of 1961 s. 115BAA -- the FA 2019 WATERSHED CORPORATE TAX REFORM that gave domestic companies the option to pay 22% income-tax (effective ~25.17% after 10% surcharge and 4% cess) IN LIEU of standard 30% rate, in exchange for forgoing certain deductions / loss-and-depreciation set-off. The 22% regime substantially aligned Indian corporate tax with global benchmarks (US 21%, UK 19%, Singapore 17%) and is now the DEFAULT CHOICE for most large Indian companies post 2019. SEVEN sub-sections cover: (1) 22% rate + condition list; (2) failure consequences; (3) loss / depreciation deemed-given-effect; (4) IFSC unit modification; (5) once-exercised-binding for subsequent years; (6) irrevocability; (7) post-s. 201 cure pathway.

Statutory text — Income-tax Act, 2025

Marginal note -- Tax on income of certain domestic companies

(1) Irrespective of anything contained in this Act but subject to the provisions of Parts A, B, E and this Part (other than sections 199 and 201) of this Chapter, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a domestic company, in respect of the total income of such person computed in the following manner:—

(a) without any deduction under—

(i) section 45(2) or 47(1)(b); or

(ii) Chapter VIII other than provisions of section 146 or 148; or

(iii) sections specified in section 205(1)(a) to (g);

(b) without set off of any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a);

(c) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 116, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).

(2) Where the person fails to satisfy the requirements contained in sub-section (1) in any tax year, the option shall become invalid in respect of the said tax year and subsequent years and other provisions of the Act shall apply, as if the option had not been exercised for such tax year and for subsequent years.

(3) The loss and depreciation referred to in sub-section (1)(b) and (c) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

(4) In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction as referred to in section 147 shall be available to such Unit subject to fulfilment of the conditions contained in that section.

(5) The provisions of this section shall not apply unless the option is exercised by the person in such manner as may be prescribed on or before the due date speci- fied under section 263(1)for furnishing the return of income and such option once exercised, shall apply to subsequent tax years.

(6) Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.

(7) In case of a person, being a domestic company, where the option exercised by it under section 201, has been rendered invalid due to violation of the conditions contained in section 205(2)(b) or (c) or (d), such person may exercise the option under this section. Tax on income of new manufacturing domestic companies.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 200	INCOME-TAX ACT, 1961 -- s. 115BAA
Sub-s. (1) -- 22% rate + deduction-forgone conditions	1961 s. 115BAA(1)/(2)
Sub-s. (2) -- failure / invalidation	1961 s. 115BAA(3)
Sub-s. (3) -- loss / depreciation deemed-fully-given-effect	1961 s. 115BAA(2A) [FA 2020]
Sub-s. (4) -- IFSC unit s. 147 deduction preserved	1961 s. 115BAA(2A) Proviso [FA 2020]
Sub-s. (5) -- option exercised before s. 263 due date	1961 s. 115BAA(5)
Sub-s. (6) -- irrevocable	1961 s. 115BAA(5) Proviso
Sub-s. (7) -- post-s. 201 cure pathway	1961 s. 115BAA cure for s. 115BAB invalidation

STATUTORY ARCHITECTURE

ELIGIBLE: any DOMESTIC COMPANY. RATE: 22% (effective ~25.17% after 10% surcharge + 4% cess). CONDITIONS (sub-s. 1) -- forfeit: (a) NO deduction under s. 45(2) [scientific R&D in-house weighted] / s. 47(1)(b) [agricultural extension] / Chapter VIII (other than s. 146 employee-cost / s. 148 inter-corporate-dividend); (b) ss. 205(1)(a)-(g) -- specified-investment-allowances; (c) NO set-off of LOSS or DEPRECIATION carried forward from earlier years if attributable to forgone-deduction categories. SUB-S. (3) DEEMED EFFECT: loss / depreciation referred in (b)/(c) deemed fully-given-effect; no further set-off in subsequent years. EFFECTIVELY: clean-slate-with-22% rate. SUB-S. (4) IFSC UNIT EXCEPTION: assessees with IFSC unit retain s. 147 IFSC unit deduction. SUB-S. (5) OPTION EXERCISE: before s. 263 due date for first year; option PERSISTS for subsequent years (no re-election needed). SUB-S. (6) IRREVOCABLE. SUB-S. (7) CURE: company that opted s. 201 (15% mfg) and got invalidated due to violation of s. 205(2)(b)/(c)/(d) may exercise s. 200 (22%) instead.

MAT INTERACTION

Critical: domestic company opting s. 200 22% regime is NOT subject to MAT under s. 206 (1961 s. 115JB) -- the trade-off is forgoing accumulated MAT credit which can no longer be carried forward / used. PRACTITIONER: companies with substantial accumulated MAT credit (typically those with prior pre-FA 2020 MAT-driven years) face a CHOICE: (a) consume MAT credit under s. 199 + MAT regime; or (b) abandon MAT credit and shift to s. 200 22%. Quantitative modeling required. MAT credit foregone vs annual savings 5-7% (30 - 22-25) determines payback. For perpetually-MAT-exposed companies (capital-intensive / long-tenor projects), s. 199 + MAT often optimal.

PLANNING NOTES

(i) ELECTION-WINDOW DISCIPLINE -- Form 10-IC before s. 263 due date for first year of opt-in; once exercised binding for life of company. (ii) MAT CREDIT TRADE-OFF -- model annual savings (~5-7%) vs MAT credit foregone. (iii) SOFTWARE / IT / SERVICES COMPANIES -- typically suit s. 200 (limited deductions to forgo). (iv) MANUFACTURING WITH SUBSTANTIAL R&D / INVESTMENT-ALLOWANCES -- evaluate whether keeping s. 199 deductions outweighs s. 200 rate saving. (v) IFSC SUBSIDIARY -- s. 147 deduction preserved; favourable. (vi) NEW-ENTITY INCORPORATION (post 1-Oct-2019 manufacturing) -- consider s. 201 15% (more aggressive).

CROSS-REFERENCES

Section 199 -- Default 25%/30% (mutually exclusive).
Section 201 -- 15% new manufacturing (alternative).
Section 205 -- Specified deductions list (s. 205(1)(a)-(g)).
Section 206 -- MAT (NOT applicable for s. 200 opt-in).
Section 116 -- Loss carry-forward (deemed fully effected).
Section 147 -- IFSC unit deduction (preserved under s. 200(4)).
Section 263 -- Return-filing due date (option exercise window).
Form 10-IC -- option-exercise form.

← All sections (537)Act 2025 hub