Section 200: optional 22% tax rate for domestic companies

The option and how income is computed

A domestic company may opt, subject to Parts A, B and E of this Chapter and this Part (other than sections 199 and 201), to be taxed at a flat 22% on total income computed:

• Without deduction under section 45(2) or 47(1)(b);
• Without deduction under Chapter VIII (other than sections 146 or 148);
• Without deduction under the sections listed in section 205(1)(a) to (g);
• Without set-off of any loss carried forward or depreciation from an earlier tax year attributable to those disallowed deductions; and
• Without set-off of any loss or unabsorbed depreciation deemed so under section 116, if attributable to those disallowed deductions.

If the conditions are not met

If the company fails to satisfy these requirements in any tax year, the option becomes invalid for that tax year and all subsequent years, and the rest of the Act applies as if the option had never been exercised for those years.

Any loss or depreciation that cannot be set off because it is attributable to a disallowed deduction is deemed to have been given full effect to, so no further deduction is allowed for it in any later year.

IFSC units and exercising the option

For a company having a Unit in an International Financial Services Centre that has exercised the option under sub-section (5), the requirement above is modified so that the deduction under section 147 remains available to that Unit, subject to that section's conditions.

The option must be exercised in the prescribed manner on or before the due date under section 263(1) for furnishing the return of income; once exercised, it applies to subsequent tax years and cannot subsequently be withdrawn for that year or any other year.

A company whose option under section 201 has become invalid because of a violation of the conditions in section 205(2)(b), (c) or (d) may instead exercise the option under this section.

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