Section 201
Section 201: concessional 15% rate for new manufacturing domestic companies
Section 201 offers the lowest of the company tax-rate options in this Chapter - 15% - but only to a domestic company newly set up for manufacturing, registered on or after 1 October 2019, that commenced production on or before 31 March 2024.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
The rates that apply
At the company's option, its total income is taxed at the following rates instead of the normal computation:
| Income | Rate |
|---|---|
| Total income other than the categories below | 15% |
| Income that has neither been derived from nor is incidental to manufacturing or production, and for which no specific rate is separately provided under Parts A, B, E and this Part of the Chapter (computed without any deduction for related expenditure or allowance) | 22% |
| Short-term capital gains from transfer of a capital asset on which no depreciation is allowable under the Act | 22% |
| Income deemed so under section 205(4) (arm's-length adjustment for related-party transactions) | 30% |
Conditions to use this section
The company must:
- Exercise the option as described below;
- Have been set up and registered on or after 1 October 2019;
- Have commenced manufacturing or production of an article or thing on or before 31 March 2024;
- Compute its total income as described in sub-section (3); and
- Fulfil the conditions in sub-section (5) of this section and in section 205(2) (which restricts using previously-used plant/machinery or buildings, and confines the business to manufacturing).
Exercising the option, and what happens on default
The option must be exercised on or before the due date under section 263(1) for furnishing the first of the returns of income for any tax year; once exercised, it applies to subsequent tax years and cannot be withdrawn for that or any other year.
If the company fails to fulfil the sub-section (1) conditions in any tax year, the option becomes invalid for that year and all subsequent years, and the rest of the Act then applies as if the option had never been exercised for those years.
How total income is computed
For the purposes of sub-section (1), total income is computed without deduction under section 45(2) or 47(1)(b), without deduction under Chapter VIII (other than sections 146 or 148), and without deduction under the sections listed in section 205(1)(a) to (g); and without set-off of any loss or unabsorbed depreciation deemed so under section 116 that is attributable to those disallowed deductions.
A loss or depreciation that cannot be set off for this reason is deemed to have been given full effect to, so no further deduction is allowed for it in a later year.
Amalgamation
On amalgamation, the option under this section remains valid only for the amalgamated company, and only if that company continues to fulfil the sub-section (1)(d) conditions.
Frequently asked questions
Which companies qualify for the 15% rate under Section 201?
A domestic manufacturing company set up and registered on or after 1 October 2019, that commenced manufacturing or production on or before 31 March 2024, and that meets the plant/machinery and business-restriction conditions in section 205(2).
What rate applies to non-manufacturing income of such a company?
22% on income not derived from or incidental to manufacturing (with no deductions for related expenditure), and 22% on short-term capital gains from an asset with no allowable depreciation.
What happens on amalgamation of a company using this option?
The Section 201 option survives only for the amalgamated company, and only if that company continues to satisfy the sub-section (1)(d) conditions.
Related sections
Want this applied to your actual filing, not just explained?
Check if the Section 201 new-manufacturing rate suits your companyLast updated 9 September 2026