Section 115BAB Explained: How New Companies Can Avail 15% Tax Rate

Published: October 15, 2025 | Category: Corporate Tax

Section 115BAB of the Income Tax Act provides a concessional 15% corporate tax rate for new domestic manufacturing companies. This benefit encourages investments under India’s Make in India initiative and reduces tax outflow for new entrepreneurs.

What is Section 115BAB?

Introduced in 2019 through the Taxation Laws (Amendment) Ordinance, Section 115BAB allows newly incorporated manufacturing companies to be taxed at a concessional rate of 15%, resulting in an effective rate of about 17.16% including surcharge and cess.

Tax Rate Snapshot

Type of Company	Basic Tax	Surcharge	Cess	Effective Rate
New Domestic Manufacturing Company (115BAB)	15%	10%	4%	≈17.16%

Eligibility Conditions

• Company incorporated on or after 1 October 2019.
• Engaged in manufacturing or production of an article or thing.
• Commenced manufacturing before 31 March 2025.
• No use of old or second-hand machinery.
• Does not engage in any service business (except incidental).
• Cannot claim deductions under sections 10AA, 32(1)(iia), or Chapter VI-A.
• Must file Form 10-ID before the due date of return filing.

Note: Keep proof of new machinery purchases and commencement date — these are checked during assessments.

Excluded Activities (Not Manufacturing)

• Software development and other IT services.
• Mining, printing of books, film production.
• Bottling of gas, conversion of marble blocks into slabs.

How to Opt for Section 115BAB

1. Incorporate a domestic company on or after 01-Oct-2019.
2. Start manufacturing before 31-Mar-2025.
3. File Form 10-ID on the Income Tax e-filing portal.
4. Opt for Section 115BAB while filing ITR-6.

Once opted, the company cannot withdraw from this regime later.

Example: Tax Comparison

Particulars	Normal Regime (22%)	115BAB Regime (15%)
Total Income	₹1,00,00,000	₹1,00,00,000
Tax Payable	₹23,92,000	₹17,16,000
Approx. Savings	—	₹6,76,000

Advantages

• Lowest corporate tax rate in India.
• Encourages new manufacturing units and startups.
• MAT (Minimum Alternate Tax) not applicable.

Limitations

• Only new manufacturing companies are eligible.
• No deductions or exemptions allowed.
• Strict compliance and reporting needed.

Documents Required

• Certificate of Incorporation (after 1 Oct 2019)
• Factory license / GST registration
• Proof of new machinery purchase
• Form 10-ID acknowledgment
• Audited financial statements

Frequently Asked Questions (FAQs)

Q1. Is MAT applicable under Section 115BAB?
No. Companies opting for Section 115BAB are exempt from MAT (Section 115JB).

Q2. Can an LLP claim this benefit?
No. Only domestic companies registered under the Companies Act can opt for 115BAB.

Q3. What happens if eligibility conditions are violated?
The concessional rate will be withdrawn and normal rates will apply from that year.

Conclusion

Section 115BAB is a golden opportunity for new manufacturing companies to reduce tax liability and boost profits. With careful compliance and timely filing, you can enjoy a low effective tax rate of just 17.16%.

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