Month: July 2026

Presumptive Taxation of Non-Residents under Section 61 of the Income-tax Act, 2025: Shipping, Cruise, Aircraft, Oil and Electronics (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 02 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Section 61 of the Income-tax Act, 2025 gathers the old non-resident presumptive sections 44B, 44BB, 44BBA, 44BBB, 44BBC and 44BBD in one table; the profit is a fixed percentage of the receipts and no deduction, loss or allowance is allowed against it.
  • The percentages are 7.5% for ships, 20% for cruise ships, 5% for aircraft, 10% for turnkey power projects (foreign company) and for mineral oil services and equipment hire, and 25% for services or technology given to a resident company that runs an electronics manufacturing facility.
  • Only the turnkey power and mineral oil cases can claim lower actual profit, and then only with books of account and an audit under sections 62 and 63.
  • A foreign ship that picks up cargo or passengers at an Indian port only occasionally is dealt with under section 316 (7.5%, return by the master before departure, port clearance withheld until tax is paid).

Some non-resident businesses are taxed on a fixed percentage of the receipts they earn from India, instead of on actual profit. In the 1961 Act these were separate sections: 44B (shipping), 44BB (mineral oil), 44BBA (aircraft), 44BBB (turnkey power projects), 44BBC (cruise ships) and 44BBD (electronics manufacturing services). The Income-tax Act, 2025, in force from 01/04/2026, puts all of them in one table in section 61(2).

The six cases

Specified business Specified assessee Profit taken as
1. Operation of ships (other than cruise ships) Non-resident 7.5% of (A + B)
2. Operation of cruise ships (conditions in Rule 44) Non-resident 20% of (A + B)
3. Operation of aircraft Non-resident 5% of (A + B)
4. Civil construction, erection, testing or commissioning of plant or machinery in a turnkey power project approved by the Central Government Foreign company 10% of the amount paid or payable, in or outside India
5. Services or facilities, including hire of plant and machinery, for prospecting for, or extraction or production of, mineral oils Non-resident 10% of (A + B)
6. Services or technology in India for setting up an electronics manufacturing facility, or for manufacturing electronic goods, for a resident company Non-resident 25% of (A + B)

In each case, A is the sum paid or payable to the assessee (or to another person on their behalf) for the Indian leg of the business, and B is the sum received or deemed to be received in India for the leg that starts outside India. For ships, A covers carriage shipped at an Indian port and includes demurrage, handling and similar charges; for aircraft it is carriage from any place in India. For cruise ships only the carriage of passengers counts, so on-board sales, dining and similar earnings are outside the base.

The result is deemed to be the profit of the business, charged under the head “Profits and gains of business or profession” for the tax year (section 61(2)).

Rules that apply to all six cases

  • No deductions. Any loss, allowance or deduction allowed by the Act cannot be set against the income computed under section 61(2) (section 61(4)).
  • Depreciation is still worked out in the background. The written down value of the assets used is computed as if depreciation had been claimed and allowed in every year (section 61(5)), so a later switch to normal computation starts from the right WDV.
  • Lower actual profit can be claimed only in cases 4 and 5, and only if the assessee keeps books of account under section 62 and gets an audit report under section 63 (section 61(3)).
  • Books and audit are triggered by section 62(2)(c) and the audit table in section 63 only if the assessee claims lower income in cases 4 and 5. A person who declares the section 61(2) figure needs no audit under section 63 (section 63(2)).
  • Case 5 and royalty or fees. Section 61 does not apply to case 5 where sections 54, 59, 207 or 527 apply to compute the profits or income referred to in them (section 61(6)). “Plant” in case 5 includes ships, aircraft, vehicles, drilling units and scientific apparatus (section 61(7)).

Cruise ship conditions (Rule 44)

The non-resident must (a) operate a passenger ship with a capacity of more than 200 passengers or a length of 75 metres or more, for leisure and recreation, with appropriate dining and cabin facilities; (b) operate it on a scheduled voyage or shore excursion that touches at least two Indian sea ports or the same Indian sea port twice; (c) operate it primarily for passengers and not for cargo; and (d) follow the procedure and guidelines, if any, issued by the Ministry of Tourism or the Ministry of Ports, Shipping and Waterways. Some older notes say “at least 200 passengers”; the Rule says “more than two hundred”.

Electronics manufacturing services (case 6)

The resident company must be establishing or operating an electronics manufacturing facility, or a connected facility, under a scheme notified by the Ministry of Electronics and Information Technology, and must not become ineligible for the scheme at any time in the tax year (section 61(8), Rule 45). Sections 59 and 207, which tax royalty and fees for technical services, do not apply to these amounts (section 61(9)).

Minimum alternate tax

The minimum alternate tax section (section 206) does not apply to a foreign company where its total income comprises solely profits and gains from a business referred to in section 61(2) and that income has been offered to tax at the rates in that section (section 206(1), clause (l)(iii)). Finance Act 2026 omitted some words after the reference to section 61(2), so confirm the latest wording before relying on this for a client.

Occasional shipping: section 316

A ship that belongs to or is chartered by a non-resident and carries passengers, livestock, mail or goods shipped at an Indian port is dealt with separately where the operator has no regular arrangement:

  1. 7.5% of the amount paid or payable for the carriage, in or outside India, including demurrage and handling charges, is deemed income accruing in India (section 316(2)).
  2. The master of the ship files a return before departure from each Indian port, showing the amounts paid or payable since the ship’s last arrival at that port. If this is not possible, satisfactory arrangements can be made for another person to file it within thirty days of departure (section 316(3) and (4)).
  3. Tax is assessed at the rate applicable to the total income of a company without an arrangement under section 393(1) (Table Sl. No. 7), and the master pays it. The order must be made within nine months from the end of the tax year in which the return is furnished (section 316(5) and (6)).
  4. Port clearance is withheld until the Commissioner of Customs or the authorised officer is satisfied that the tax is paid or satisfactory arrangements are made (section 316(8)).
  5. Option for regular assessment. The owner or charterer can claim, before the end of the year following the tax year of departure, that the total income be assessed under the other provisions of the Act. The amount paid under section 316 is then treated as advance tax and adjusted against the final tax, with any difference paid or refunded (section 316(9) and (10)).

Practical points

  • Choose the section 61 route knowingly: the percentage is fixed, but losses and allowances are lost, and a business with real losses can be worse off.
  • Check the fixed assessee: cases 1 to 3, 5 and 6 are for a non-resident, case 4 only for a foreign company.
  • Treaty protection can still matter. This post covers the domestic law only; the treaty position needs a separate check.

How CSM & Co LLP can help

We advise foreign shipping, aviation, construction and technology businesses on Indian tax, compute presumptive income and file returns. Please reach out to our team and we will be happy to assist.

Frequently asked questions

What replaces sections 44B, 44BB, 44BBA, 44BBB, 44BBC and 44BBD?

Section 61 of the Income-tax Act, 2025. Its table lists six specified businesses, the specified assessee for each, and how the profit is computed (section 61(2)).

What is the presumptive rate for a non-resident shipping company?

7.5% of the sum paid or payable for carriage of passengers, livestock, mail or goods shipped at an Indian port (in or outside India), plus the sum received or deemed to be received in India for carriage from a port outside India, including demurrage and handling charges (section 61(2), Table Sl. No. 1).

Which cruise ships qualify for 20%?

A non-resident must operate a passenger ship of more than two hundred passengers capacity or 75 metres or more in length, for leisure and recreation, with dining and cabin facilities, on a scheduled voyage or shore excursion touching at least two Indian sea ports or the same port twice, primarily for passengers and not cargo, as per the procedure and guidelines of the Ministry of Tourism or the Ministry of Ports, Shipping and Waterways (Rule 44). Only the amount for carriage of passengers is counted.

Can I claim that my actual profit is lower?

Only in the turnkey power project case (foreign company, 10%) and the mineral oil services case (10%), and only if you keep books of account under section 62 and get an audit under section 63 (section 61(3)). The other cases are fixed.

Is MAT charged on a foreign company taxed under section 61?

Section 206, the minimum alternate tax section, does not apply to a foreign company whose total income is only profits and gains from a business referred to in section 61(2) offered to tax at the section’s rates (section 206(1), clause (l)(iii)). The reference to certain sub-clauses was omitted by Finance Act 2026; check the current text for your case.

What is section 316?

Section 316 deals with a ship belonging to or chartered by a non-resident that carries passengers, livestock, mail or goods shipped at an Indian port. 7.5% of the amount paid or payable is deemed income, the master of the ship files a return before departure from each Indian port, tax is assessed at the rate applicable to a company with no arrangement under section 393(1) (Table Sl. No. 7), and port clearance is not given until the tax is paid or secured.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Cash Transaction Limits under the Income-tax Act, 2025: Sections 185 to 188 and Section 36(4) (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 31 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Sections 185 to 188 of the Income-tax Act, 2025 replace the old sections 269SS, 269ST, 269SU and 269T: loans, deposits and property advances of ₹20,000 or more must come and go through banking modes, and receipts of ₹2,00,000 or more must not be in cash.
  • The penalty for breaking sections 185, 186 or 188 is equal to the full amount taken, received or repaid (sections 450, 451 and 453); not offering UPI and similar modes when turnover exceeds ₹50 crore costs ₹5,000 a day (section 452).
  • Separately, section 36(4) disallows an expense if more than ₹10,000 is paid to one person in a day by cash (₹35,000 for goods carriage hire), and section 36(5) treats the same cash payment of an earlier year’s liability as income.
  • Banking mode means an account payee cheque or draft, electronic clearing through a bank account, or a prescribed electronic mode.

Cash dealings above certain limits are barred or penalised under the income tax law. The 1961 Act scattered these rules in sections 269SS, 269ST, 269SU, 269T and 40A(3). In the Income-tax Act, 2025, which applies from 01/04/2026, the first four sit together in Chapter XII (sections 185 to 189), with penalties in sections 450 to 453, and the business expense rule is section 36(4) to (7).

Old and new sections

Old section New section Subject Limit
269SS 185 Taking or accepting a loan, deposit or specified sum ₹20,000 or more
269ST 186 Receiving money in cash ₹2,00,000 or more
269SU 187 Facility for digital payment modes Turnover above ₹50 crore
269T 188 Repaying a loan, deposit or specified advance ₹20,000 or more
40A(3) and 40A(3A) 36(4), (5), (6), (7) Expense paid in cash More than ₹10,000 in a day
271D, 271DA, 271E 450, 451, 453 Penalty Equal to the amount

Section 185: loans, deposits and property advances

No person may take or accept a loan, deposit or specified sum except by an account payee cheque, an account payee bank draft, electronic clearing through a bank account, or another prescribed electronic mode, if:

  • the amount (or aggregate amount) is ₹20,000 or more; or
  • the earlier loans, deposits or specified sums from the same person that remain unpaid, whether due or not, are ₹20,000 or more; or
  • the total of the two is ₹20,000 or more.

A specified sum is any sum receivable, as advance or otherwise, in relation to a transfer of immovable property, whether or not the transfer takes place. “Loan or deposit” means a loan or deposit of money (section 185(5)).

Example. Mr P took a loan of ₹10,000 by cheque from ABC and repaid ₹3,000 in cash, leaving ₹7,000 unpaid. If he now takes a further ₹15,000 in cash from ABC, the amount (₹15,000) plus the unpaid earlier loan (₹7,000) is ₹22,000, which is above ₹20,000. Section 185 is broken and the penalty is equal to the ₹15,000 accepted.

Exceptions

Section 185 does not apply to loans, deposits or sums taken from or by the Government, a banking company, the post office savings bank, a co-operative bank, a corporation established by a Central, State or Provincial Act, a Government company, or a body notified by the Central Government. It also does not apply where both parties have agricultural income and neither has income chargeable to tax under the Act. For a primary agricultural credit society or a primary co-operative agricultural and rural development bank, the limit with its members is ₹2,00,000 (section 185(4)).

Section 186: receipts of ₹2,00,000 or more

No person may receive ₹2,00,000 or more in aggregate from a person in a day, for a single transaction, or for transactions relating to one event or occasion from a person, except by account payee cheque, account payee bank draft, electronic clearing through a bank account or another prescribed electronic mode. It does not apply to receipts by the Government, banks, the post office savings bank and co-operative banks, to transactions covered by section 185, or to persons or receipts the Central Government notifies.

Section 187: digital modes for large businesses

A person carrying on business or profession whose total sales, turnover or gross receipts exceeded ₹50 crore in the preceding tax year must give customers the facility to pay through the prescribed electronic modes in addition to any others. Rule 133 prescribes RuPay debit card, UPI (BHIM-UPI), UPI QR code and Tier III full KYC Central Bank Digital Currency wallets. The penalty is ₹5,000 a day (section 452).

Section 188: repayment of loans, deposits and advances

A bank branch, another company, a co-operative society, a firm or any other person must not repay a loan or deposit, or return a specified advance, except by account payee cheque, account payee bank draft drawn in the name of the person who made it, or electronic clearing or another prescribed electronic mode, where the amount with interest, or the total held from that person, is ₹20,000 or more. A bank branch may also repay by crediting the depositor’s savings or current account at that branch. The same exceptions as in section 185 apply, and for a primary agricultural credit society the limit with its members is ₹2,00,000. The penalty is the amount repaid (section 453).

Penalties

Section broken Penalty section Amount
185 (loan, deposit, specified sum) 450 Equal to the amount taken or accepted
186 (receipt) 451 Equal to the sum received
187 (digital modes) 452 ₹5,000 for every day of failure
188 (repayment) 453 Equal to the amount repaid

The Assessing Officer “may” impose these penalties, and the general rules of the penalty Chapter apply:

  • Reasonable cause: no penalty under sections 450, 451, 452 or 453 is imposed if the person proves there was reasonable cause for the failure (section 470).
  • Hearing: the order cannot be made without hearing the assessee, and a show-cause notice is required (section 471(1), as amended by Finance Act 2026).
  • Approval: the prior approval of the Joint Commissioner is needed where the penalty exceeds ₹10,000 (by the Income-tax Officer) or ₹20,000 (by the Assistant or Deputy Commissioner) (section 471(2)).
  • Time limit: the order must be passed within six months from the end of the quarter in which the proceedings are completed, the appeal order is received or the penalty notice is issued, as the case may be (section 472(1)).

Section 36(4) to (7): cash business expenses

Separate from the above, a business or professional expense is not allowed as a deduction if the payment, or the aggregate of payments made in a day to a person, exceeds ₹10,000 and is not made through a specified banking or online mode (section 36(4)). If a liability was allowed in an earlier year and is later paid in cash above the same limit, the amount is deemed to be business income of the year of payment (section 36(5)). For plying, hiring or leasing of goods carriages the limit is ₹35,000 (section 36(6)). The Rules can exempt cases having regard to banking facilities and business expediency (section 36(7)). The “specified banking or online mode” means an account payee cheque or bank draft, electronic clearing through a bank account, or another prescribed electronic mode (section 2).

A payment of more than ₹10,000 in a day in cash for acquiring an asset is also left out of the actual cost for depreciation (section 39(2)).

Reporting in the tax audit report and ITR

The tax audit report (Form 26) has a clause (clause 45 of the form) asking whether any loan, deposit or specified sum was taken or accepted above the section 185 limit, whether any receipt or payment above the section 186(1) limit was made otherwise than by the permitted modes, and whether any repayment above the section 188(1) limit was made otherwise than by those modes. The auditor reports these as facts, so keep proof of the mode of every large entry.

How CSM & Co LLP can help

We review cash entries before the tax audit, reply to penalty notices under sections 450 to 453 and set up payment practices that keep a business within the limits. Please reach out to our team and we will be happy to assist.

Frequently asked questions

What is the cash limit for taking a loan or deposit?

A loan, deposit or specified sum must come by account payee cheque, account payee bank draft, electronic clearing through a bank account or another prescribed electronic mode if the amount, or the amount together with the earlier loans and deposits from the same person that are still unpaid, is ₹20,000 or more (section 185(1)). This is the old section 269SS.

Can I receive ₹2,00,000 in cash for a sale?

No. Receiving ₹2,00,000 or more in a day from one person, for a single transaction, or for transactions relating to one event or occasion, is allowed only through banking modes (section 186). The penalty is equal to the sum received (section 451). Receipts by the Government, banks, post office savings banks and co-operative banks are outside the section.

Does the ₹20,000 limit apply to advances for property?

Yes. “Specified sum” means any sum receivable, as advance or otherwise, in relation to a transfer of immovable property, whether or not the transfer takes place (section 189(c)). Accepting it in cash at ₹20,000 or more attracts section 185 and a penalty equal to the amount.

What is the limit for cash business expenses?

If more than ₹10,000 is paid to one person in a day other than through a specified banking or online mode, the expenditure is not allowed as a deduction (section 36(4)). The limit is ₹35,000 for plying, hiring or leasing of goods carriages (section 36(6)).

Which payments are exempt from sections 185 and 188?

Dealings with the Government, banks, post office savings banks and co-operative banks, corporations created by a Central, State or Provincial Act, Government companies, and bodies notified by the Central Government. Section 185 also does not apply where both parties have agricultural income and neither has income chargeable to tax. The limit is ₹2,00,000 for loans and deposits between a primary agricultural credit society (or a primary co-operative agricultural and rural development bank) and its members.

Who must offer UPI and other digital payment modes?

A person carrying on business or profession whose total sales, turnover or gross receipts in the preceding tax year exceeded ₹50 crore (section 187). The modes listed in Rule 133 are RuPay debit card, UPI, UPI QR code and Tier III full KYC Central Bank Digital Currency wallets. The penalty is ₹5,000 for every day of failure (section 452).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Charitable Trusts and NGOs under the Income-tax Act, 2025: Registration, Exemption and Compliance (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 10 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • From 01/04/2026 a trust, society or section 8 company claims its tax benefit as a “registered non-profit organisation” under sections 332 to 355 of the Income-tax Act, 2025 (the old sections 11, 12, 12A, 12AB and 13).
  • Registration is applied for in Form 104 (provisional) or Form 105, and the order in Form 106 carries a 16 digit Unique Registration Number.
  • Regular income is taxed only on the part of 85% that is not applied or accumulated; specified income such as anonymous donations and benefits to related persons is taxed at 30%.
  • Books (Rule 187), audit in Form 112 and the return in ITR-7 are compulsory when income before the exemption exceeds the maximum amount not chargeable to tax.
  • Donors’ deduction needs a separate approval under section 354, Form 113 by 31 May and Form 114 donation certificates.

A charitable trust, a society or a section 8 company does not pay tax on its charitable income, but only if it is registered and follows a set of conditions. From 01/04/2026 those rules sit in sections 332 to 355 of the Income-tax Act, 2025, in a scheme that replaces the old sections 11, 12, 12A, 12AB and 13. The law calls such a body a registered non-profit organisation. This post follows the new Act and the Income-tax Rules, 2026, and explains where the old form numbers have gone.

Where the old sections have gone

Old (1961 Act) New (2025 Act and Rules 2026)
Sections 12A and 12AB (registration), Forms 10A and 10AB Section 332; Form 104 (provisional) and Form 105 (all other cases); order in Form 106 (Rule 181)
Sections 11 and 12 (exemption of property income and voluntary contributions) Sections 334 to 343 (regular income, 85% application, accumulation)
Section 11(1)(d) (corpus donations) Sections 339 and 340
Section 13 (denial of exemption) Sections 337 (specified income), 351 (specified violation), 353 (other violations)
Tax on accreted income (section 115TD) Section 352
Section 80G approval Section 354 (approval for donor deduction under section 133(1)(b)(ii))
Form 10B and 10BB (audit report) Form 112 (Rule 188)
Form 10 and 9A (accumulation, option) Forms 109 and 108 (Rules 185 and 184)
Forms 10BD and 10BE (donation statement and certificate) Forms 113 and 114 (Rule 190)

Section 11 of the 2025 Act is not the trust section: it is the general list of exempt income in Schedules II to VII. The older notes that call it the trust exemption refer to the 1961 Act.

Who can register (section 332)

The following may apply: a public trust, a society, a section 8 company, a university or an educational institution affiliated to it or recognised by the Government, an institution financed wholly or partly by the Government or a local authority, and certain bodies listed in Schedules III and VII. To be eligible the applicant must be constituted in India for one or more charitable purposes (section 2(23): relief of the poor, education, yoga, medical relief, preservation of environment, preservation of monuments or places of artistic or historic interest, and advancement of any other object of general public utility) or public religious purposes, and its properties must be held under an irrevocable trust for the benefit of the general public.

Forms, time limits and validity

Applications are filed electronically in Form 104 (provisional registration, to the Commissioner, CPC) or Form 105 (to the jurisdictional Principal Commissioner or Commissioner). The order in Form 106 carries a 16 digit Unique Registration Number (URN).

Case (section 332(3)) When to apply Order within Valid for
1. Activities not started, never registered Any time in the tax year from which registration is sought One month from the end of the month Three tax years
2. Activities started, never registered Any time in the tax year from which registration is sought Six months from the end of the quarter Five tax years
3. Provisional registration, activities started Within six months of commencement Six months from the end of the quarter Five tax years
4. Provisional registration about to expire, activities not started At least six months before expiry Six months from the end of the quarter Five tax years
5. Registration about to expire At least six months before expiry Six months from the end of the quarter Five tax years
6. Registration inoperative after a switch of regime Any time in the tax year from which it is to operate Six months from the end of the quarter Five tax years
7. Objects modified so that they no longer fit the registration Within thirty days of the modification Six months from the end of the quarter Five tax years

If the total income (without the benefit of this Part) did not exceed ₹5 crore in each of the two preceding tax years, the validity in cases 3 to 7 becomes ten years (section 332(5)). A late application can be condoned for reasonable cause (section 332(4)); if it is not, tax on accreted income can follow (section 332(6)). A trust that held registration before 01/04/2021 and let it lapse can ask for condonation under section 332(9).

How the income is taxed

The tax is the total of two parts (section 334): 30% on “specified income”, and the normal rate on taxable regular income and residual income.

  1. Regular income (section 335) is income from the charitable or religious activity, income from property, deposits or investments held for those purposes, voluntary contributions and the gains of permitted commercial activity. Corpus donations are left out (section 338(b)).
  2. Taxable regular income (section 336) is nil if 85% or more of the regular income is applied under section 341 or accumulated under section 342. If less is applied, the tax falls on 85% of the regular income reduced by the amount applied or accumulated.
  3. Specified income (section 337) is taxed at 30% in the year shown in the table of that section. It includes:
    - anonymous donations, except those up to ₹1,00,000 or 5% of total donations (whichever is higher), and except for bodies set up wholly for religious purposes or wholly for charitable and religious purposes (with a carve-out for donations directed to a university, other educational institution, hospital or medical institution that the body runs);
    - income applied directly or indirectly for the benefit of a related person (Rule 183);
    - income applied outside India (other than as the Board allows under section 338(a));
    - investments outside the permitted modes in Schedule XVI (section 350);
    - income applied for a purpose other than the one for which it is registered, and accumulated income that is misapplied, not applied in time, or paid to another organisation.
  4. Residual income is any other income, taxed at the normal rate (section 355(j)).

What counts as application (section 341)

  • Sums paid in India for the charitable or religious purpose in the year, and 85% of a donation to another registered non-profit organisation. Cash payments above the limits in sections 35(b)(i) and 36(4) to (7) do not count.
  • Repayment of a loan or re-deposit of a corpus withdrawal within five years can count as application, subject to the conditions in section 341(2).
  • A claim of depreciation on an asset whose cost was already counted as application is not allowed again (section 341(3)(a)).
  • If the regular income applied is below 85%, the shortfall can be treated as deemed application by opting in Form 108 by the due date of the return, and then it must be applied in India in the tax year of receipt or the next one (section 341(5) to (7), Rule 184).
  • Capital gains on a charitable asset are treated as applied if the net consideration is invested in another such asset (section 341(9)).

Accumulation (section 342) and the 15% balance (section 343)

Income can be set apart for up to five years by filing a statement in Form 109 by the due date of the return. The accumulated money must be held in the modes in Schedule XVI. A change of purpose needs an application in Form 110 (order in Form 111). The 15% of regular income that is neither applied nor accumulated is deemed accumulated income and must also be held in permitted modes (section 343).

Business income

A registered non-profit organisation must not carry on commercial activity unless it is incidental to its objects and separate books are kept (section 345). A body whose objects are in the nature of “advancement of any other object of general public utility” may earn at most 20% of its total receipts from commercial activity, and only in the course of that object (section 346). The gain from such activity is worked out as if the activity were a separate entity (Rule 182). Where a business undertaking is part of the trust property, the Assessing Officer can determine its income (section 344).

Compliance every year

Item Rule Detail
Books of account Section 347, Rule 187 Cash book, ledger, journal, bills and receipts, plus records of every project and institution, of each type of income and of specified and residual income
Audit Section 348, Rule 188 Report in Form 112, one month before the due date of the return (so 30 September when the return date is 31 October)
Return Section 349, Rule 164(10) ITR-7, within the time in section 263(1)(c), or the extended period in section 263(4) after Finance Act 2026
Option and statements Rules 184 and 185 Form 108 (deemed application) and Form 109 (accumulation), both by the return due date

Books, audit and return are required when the total income, without giving effect to this Part, exceeds the maximum amount not chargeable to income tax in the year. Missing any of the three, or a commercial activity that breaks section 346, makes the whole regular income taxable (less allowed expenditure in India for the objects) under section 353.

Violations and accreted income

A specified violation (section 351) includes applying income other than for the objects, commercial activity in breach of section 345, application for private religious purposes, benefits for a particular religious community or caste (for bodies created after commencement of the Act), activity that is not genuine, non-compliance with another law that has been finally held against the body, and false information in the application. The Commissioner can cancel the registration for that and all later years, after a hearing, within six months from the end of the quarter in which the first notice is issued.

Tax on accreted income (section 352) is charged at the maximum marginal rate on the market value of all assets less all liabilities (valued under Rule 189), after removing specified assets. It arises when registration is cancelled, when objects are changed and do not fit, when the body fails to apply for renewal, when it converts into a form that cannot be registered, when it merges with an entity that does not fit the rules (as amended by Finance Act 2026) or when assets are not transferred to another registered non-profit organisation within twelve months of dissolution. A merger with another registered non-profit organisation of the same or similar objects, meeting the prescribed conditions, is outside section 352 (section 354A).

Donor deduction (section 354)

Registration alone does not give donors a deduction. A registered non-profit organisation applies separately for approval under section 354 (approval for section 133(1)(b)(ii)), using Form 104 or Form 105 with the same time limits and validity as registration. The conditions include: no benefit for a particular religious community or caste, religious expenditure not above 5% of total income, no transfer of assets to a non-charitable purpose, regular accounts, and a donor certificate. The body must furnish the statement of donations in Form 113 and issue the certificate in Form 114 by 31 May after the financial year in which the donation is received (Rule 190).

Practical checklist

  1. Note the expiry of your registration and approval; file the renewal at least six months earlier.
  2. Plan the year so that at least 85% of regular income is applied or accumulated; file Form 108 or Form 109 before the return date.
  3. Keep corpus donations in a separate, permitted investment.
  4. Check every related person transaction (trustees, relatives, founders, donors above ₹1,00,000 in a year or ₹10 lakh in aggregate).
  5. File Form 112 and the return on time; file Form 113 and issue Form 114 by 31 May.

How CSM & Co LLP can help

We handle registration and renewal applications, yearly audit reports, ITR-7 filing and donor-approval compliance for trusts, societies and section 8 companies. Please reach out to our team and we will be happy to assist.

Frequently asked questions

Which section of the new Act replaces sections 11 and 12A for charitable trusts?

Chapter XVII, Part B (sections 332 to 355) of the Income-tax Act, 2025. Section 332 deals with registration, sections 334 to 343 with the taxation of income, and sections 347 to 349 with books, audit and return. Section 11 of the 2025 Act is a different section: it is the general list of exempt income (Schedules II to VII).

Does an existing 12A or 12AB registration continue?

The 2025 Act refers to registration under any “specified provision”, and a person with a valid registration that has not been cancelled is a registered non-profit organisation (section 355(g)). Check the expiry date on your registration order, because renewal is due at least six months before it ends (section 332(3), Table Sl. No. 5).

How much of the income must a trust spend?

Taxable regular income is nil if 85% or more of the regular income is applied for charitable or religious purposes (section 341) or accumulated under section 342. Otherwise the shortfall below 85% is taxed (section 336). A shortfall can be treated as deemed application by opting in Form 108, and then must be applied in India within the time in section 341(6).

Is an audit compulsory?

Yes, when total income without giving effect to this Part exceeds the maximum amount not chargeable to income tax in the year (section 348). The report is in Form 112, due one month before the due date of the return (Rule 188). The return is ITR-7 (section 349, Rule 164(10)).

Can a trust run a business?

Only if the activity is incidental to its objects and separate books are kept (section 345). A trust whose object is “any other object of general public utility” may earn at most 20% of its total receipts from commercial activity, and only in the course of carrying out that object (section 346).

What happens if registration is cancelled?

The organisation becomes liable to tax on accreted income at the maximum marginal rate, which is the market value of its assets less its liabilities, payable within fourteen days of the due date in the table in section 352(4). The same tax can arise on a change of objects, a merger with an ineligible entity or a failure to transfer assets on dissolution.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Duties of Directors, Directorship Limit and Vacation of Office: Sections 165 to 168 of the Companies Act, 2013

Posted on by CA Meet Dhrangadhariya

Last updated: 09 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A person cannot be a director in more than 20 companies at the same time, and not more than 10 of them public companies. Dormant companies are not counted towards the 20, and a private company that is a holding or subsidiary of a public company counts as public for the limit of 10.
  • Section 166 sets the duties of a director: act within the articles, in good faith, with due care and independent judgment, avoid conflicts, no undue gain, no assignment of office. A breach is punishable with a fine of Rs 1 lakh to Rs 5 lakh.
  • The office becomes vacant on disqualification, absence from all Board meetings for twelve months, breach of the interest disclosure rules, conviction with at least six months imprisonment, removal, and others.
  • A director resigns by written notice; resignation takes effect from the date the company receives the notice or the date in the notice, whichever is later.

Directors run a company on behalf of its members, so the Companies Act, 2013 caps how many boards one person can sit on, lists the duties that every director owes, and says when the office ends. This post covers sections 165 to 168.

How many directorships (section 165)

  • No person can hold office as a director, including an alternate directorship, in more than 20 companies at the same time.
  • Of these, not more than 10 can be public companies. For this limit, a private company that is a holding or subsidiary of a public company is counted as a public company.
  • A directorship in a dormant company is not counted for the limit of 20.
  • The members of a company can, by special resolution, set a lower number of companies in which a director of that company may act as director.
  • Penalty: a person who accepts an appointment in violation of the section is liable to Rs 2,000 for each day after the first during which the violation continues, up to a maximum of Rs 2 lakh.

Duties of a director (section 166)

  1. Act in accordance with the articles of the company.
  2. Act in good faith to promote the objects of the company for the benefit of its members as a whole, and in the best interests of the company, its employees, the shareholders, the community and the protection of the environment.
  3. Exercise duties with due and reasonable care, skill and diligence, and independent judgment.
  4. Do not get into a situation where there is, or may be, a direct or indirect interest that conflicts with the interest of the company.
  5. Do not achieve or attempt to achieve any undue gain or advantage for yourself or your relatives, partners or associates. A director found guilty of undue gain must pay the company an amount equal to the gain.
  6. Do not assign your office; any assignment is void.

Penalty: a director who contravenes section 166 is punishable with a fine of not less than Rs 1 lakh, which may extend to Rs 5 lakh.

When the office becomes vacant (section 167)

The office of a director becomes vacant if he:

  • incurs any disqualification under section 164 (where the disqualification arises from default in filing financial statements or repaying deposits under section 164(2), the office is vacated in all companies other than the company in default);
  • absents himself from all Board meetings held during twelve months, with or without leave of absence;
  • acts in contravention of section 184 on contracts in which he is interested, or fails to disclose his interest;
  • is disqualified by an order of a court or the Tribunal;
  • is convicted by a court of any offence, whether or not involving moral turpitude, and sentenced to imprisonment for not less than six months. The office is not vacated for 30 days from the conviction or order, and not until an appeal or petition filed within that time (and any further appeal filed within seven days) is disposed of;
  • is removed under the Act; or
  • was appointed a director by virtue of an office or employment in the holding, subsidiary or associate company, and ceases to hold that office or employment.

A person who goes on acting as a director when he knows that the office has fallen vacant is punishable with a fine of Rs 1 lakh to Rs 5 lakh. A private company can add other grounds for vacation in its articles. If all directors vacate, the promoter, or in his absence the Central Government, appoints the required number of directors until the company appoints others in general meeting.

Resignation (section 168)

  • A director resigns by written notice to the company. The Board takes note, and the company informs the Registrar in the prescribed manner, time and form, and places the fact of resignation in the directors’ report laid at the next general meeting.
  • The director may also forward a copy of the resignation with detailed reasons to the Registrar within 30 days of the resignation.
  • The resignation takes effect from the date on which the notice is received by the company, or the date specified in the notice, whichever is later.
  • A director who has resigned remains liable for offences that occurred during his tenure.
  • If all directors resign, the promoter, or the Central Government in his absence, appoints directors until the company appoints them in general meeting.

A short checklist for a director

  1. Keep a list of the directorships you hold, and count public companies (and private subsidiaries of public companies) separately.
  2. Attend at least one Board meeting in every twelve months, since absence from all meetings vacates the office.
  3. Disclose your interest in contracts and arrangements as section 184 requires.
  4. Read the articles, and record the reasons and information on which you rely when you decide.
  5. When you resign, send written notice, keep proof of receipt, and file your own copy with reasons with the Registrar within 30 days if you want the reasons on record.

Points to check

  • This post follows the Companies Act as published on India Code, including amendments up to the footnotes in that edition. Rules on appointment, disclosure forms and filing times are in separate rules and forms, which this post does not reproduce.
  • For listed companies, SEBI’s listing regulations impose further limits on directorships and on independent directors.

Frequently asked questions

How many companies can a person be a director of?

Not more than 20 companies at the same time, including alternate directorships, and not more than 10 public companies. A dormant company is not counted for the limit of 20. A private company that is a holding or subsidiary of a public company counts as a public company for the limit of 10.

What is the penalty for holding too many directorships?

A person who accepts an appointment in violation of section 165 is liable to a penalty of Rs 2,000 for each day after the first during which the violation continues, up to a maximum of Rs 2 lakh.

Can a company have a lower limit?

Yes. Members may, by special resolution, specify a lesser number of companies in which a director of that company may act as director.

What are the main duties of a director?

To act in accordance with the articles, in good faith to promote the objects of the company for the benefit of its members as a whole and in the best interests of the company, its employees, shareholders, the community and the environment; to use due and reasonable care, skill and diligence and independent judgment; to avoid conflicts of interest; not to make undue gain; and not to assign the office.

What is the penalty for breach of directors’ duties?

A fine of not less than Rs 1 lakh, which may extend to Rs 5 lakh. A director who makes an undue gain must also pay the company an amount equal to the gain.

When does a director’s office become vacant?

On disqualification under section 164, absence from all Board meetings held in twelve months, breach of the rules on interest in contracts, disqualification by a court or Tribunal, conviction with imprisonment of at least six months, removal under the Act, or ceasing to hold the office in the holding, subsidiary or associate company by virtue of which he was appointed.

How does a director resign?

By written notice to the company. The Board takes note, the company informs the Registrar, and the director may also forward a copy with reasons to the Registrar within 30 days. The resignation takes effect on the date of receipt or the date given in the notice, whichever is later.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Sign-On Bonus Repaid to the Old Employer: Can You Deduct It From Salary? (ITAT Chennai)

Posted on by CA Meet Dhrangadhariya

Last updated: 03 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A sign-on bonus is salary and is taxed when you receive it.
  • In S.S.N. Ravi v ACIT (ITAT Chennai, 06/05/2016), an employee who repaid a ₹25 lakh sign-on bonus to his old employer on leaving early was not allowed to reduce his taxable salary by that amount.
  • The Tribunal held that the bonus was a revenue receipt, he left voluntarily, and the Act has no provision to deduct such a repayment from salary.
  • Section 19 of the Income-tax Act, 2025 lists the deductions from salary, and a repaid bonus is not one of them.

A sign-on bonus is a payment to attract you to a job. Most contracts add a clawback: if you leave within a year, you repay it. The tax question that follows is a hard one. You were taxed on the bonus when you got it. Can you reduce your taxable salary when you pay it back?

The tax position on receipt

A sign-on bonus is paid by the employer because of the employment. That makes it salary. Section 16 of the Income-tax Act, 2025 says salary includes wages, fees or commission, perquisites and profits in lieu of salary, and a joining bonus falls in these. The employer deducts TDS under section 392 when it pays the bonus.

The case: S.S.N. Ravi v ACIT

Forum and date: Income Tax Appellate Tribunal, Chennai, order dated 06/05/2016, I.T.A. No. 933/Mds/2015, assessment year 2008-09.

Facts

  • The taxpayer joined Barclays in November 2006 and received a sign-on bonus of ₹25 lakh in FY 2006-07, which he included in his income of that year.
  • The bonus was repayable if he left within one year.
  • He left on 31/10/2007, before the year was complete, and moved to Deutsche Bank. Deutsche Bank paid him ₹25 lakh, which he used to repay Barclays.
  • In his return for FY 2007-08 he reduced his salary by ₹25 lakh. The Assessing Officer added it back.

Decision. The Tribunal dismissed the appeal. In short:

  • The sign-on bonus is a revenue receipt of the nature of employment income.
  • The employee left voluntarily; he was not terminated.
  • Section 17(1) of the 1961 Act made no provision for reducing salary by a refund of the bonus.
  • The amount that the new employer paid to cover the repayment could not be treated as compensation for the lost bonus.
  • The ₹25 lakh could not be reduced from taxable income.

The position under the Income-tax Act, 2025

The 2025 Act has the same structure. Section 19(1) lists the deductions from salary: professional tax, the standard deduction, the retirement exemptions (gratuity, commutation of pension, leave encashment and similar) and compensation items. A repayment of a bonus is not in that list.

The ruling is a Tribunal order on its facts, in a case where the employee left voluntarily and a new employer paid the sum. Do not treat it as settling every repayment: a different fact pattern could be argued differently.

Practical points

  1. Read the clawback clause before you sign. Check the repayment period and whether the repayment is of the gross amount or of the amount net of tax.
  2. If your new employer reimburses the repayment, remember that the reimbursement is a payment from an employer, so expect it to be taxed as salary, with no deduction for the amount you repay.
  3. Take advice before claiming a deduction for a repaid bonus. If you claim it, keep the contract, the repayment proof and the old employer’s acknowledgement.

Frequently asked questions

Is a sign-on bonus taxable?

Yes. It is a payment from the employer in connection with employment, so it is salary under section 16 of the Income-tax Act, 2025 and taxed in the year you receive it, with TDS.

Can I deduct a sign-on bonus that I repay to my old employer?

The Chennai Tribunal held that you cannot reduce your taxable salary by a repaid sign-on bonus when the employee left voluntarily. The Act does not provide a deduction for the repayment.

Does it matter that my new employer reimbursed the repayment?

In S.S.N. Ravi the new employer paid the employee the amount to repay. The Tribunal treated it as a revenue receipt, not a capital receipt, and the employee was taxed on it as well.

Which case is this?

S.S.N. Ravi, Chennai v ACIT, ITAT Chennai, order dated 06/05/2016, I.T.A. No. 933/Mds/2015, assessment year 2008-09.

What should I do before signing a sign-on bonus clause?

Read the clawback terms and ask who bears the tax if you have to repay. If a new employer will reimburse the repayment, ask for advice on how that payment will be taxed in your hands.

Official sources

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Gujarat Minimum Wages Revised (01 April 2026 to 30 September 2026): What Employers Must Do

Posted on by CA Meet Dhrangadhariya

Last updated: 15 July 2026 · Reading time: 6 min

Quick summary

  • Gujarat minimum wages hiked by Rs. 12 per day (approx. Rs. 312 per month).
  • Effective 01 April 2026 to 30 September 2026.
  • Applies to 46 scheduled employments, factories, ship-breaking work and sweeping & cleaning work.
  • Employers must revise payroll, wage registers and notice boards from the April 2026 wage cycle.

The Labour & Employment Department, Government of Gujarat has notified a revision in minimum wages applicable across the State. The revised rates are effective for the six-month cycle 01 April 2026 to 30 September 2026.

Every employer in Gujarat covered under the Minimum Wages Act, 1948 must reflect these revised rates in wages payable from the April 2026 wage cycle onwards. Non-compliance carries penal, financial and reputational risk — and is a common finding during labour inspections and internal audits.

Notification at a glance

  • Effective period: 01 April 2026 to 30 September 2026
  • Notification reference: ક્રમાંક: પ.લ.મ.૬/ટ.૩/૨૦૨૬/૧૪૨ થી ૧૬૪, dated 01-04-2026
  • Issued by: Labour & Employment Department, Government of Gujarat
  • Wage revision: +Rs. 12 per day / +Rs. 312 per month
  • Coverage: 46 scheduled employments, factories & ship-breaking work, and sweeping & cleaning work

Revised daily minimum wage rates (in Rupees)

The “Per day” figure is what an employer must pay a worker per working day. It is the sum of Basic and V.D.A.

Scheduled employment / Factory / Ship-breaking work

Category Zone Basic V.D.A. Per day Per month
Skilled Zone I 474.00 60.50 534.50 13,897
Semi-skilled Zone I 462.00 60.50 522.50 13,585
Unskilled Zone I 452.00 60.50 512.50 13,325
Skilled Zone II 462.00 60.50 522.50 13,585
Semi-skilled Zone II 452.00 60.50 512.50 13,325
Unskilled Zone II 441.00 60.50 501.50 13,039

Sweeping & cleaning work

Zone equivalent Basic V.D.A. Per day Per month
Zone I equivalent 452.00 60.50 512.50 13,325
Zone II equivalent 441.00 60.50 501.50 13,039

Zone classification

  • Zone I: All Municipal Corporations and Municipalities in Gujarat.
  • Zone II: All other areas in Gujarat not covered under Zone I.

Worker category definitions

  • Unskilled: Simple duties requiring the operation of simple tools or machines and little or no independent judgement.
  • Semi-skilled: Work of a defined routine nature; the requirement is judgement of a limited scope, not skill.
  • Skilled: Working efficiently while exercising considerable independent judgement, with thorough knowledge of the trade.
  • Highly skilled: Working efficiently and supervising the work of skilled workers.

Understanding V.D.A. (Variable Dearness Allowance)

V.D.A., also called the Special Allowance or Dearness Allowance, is a component that is revised periodically based on movement in the Consumer Price Index (CPI). For this cycle, V.D.A. is Rs. 60.50 per day uniformly across all categories and zones.

It must be paid over and above the basic minimum wage, or, at the employer’s option, merged into the basic — provided the total payable to the worker is not less than the notified minimum “Per day” rate.

Employer compliance checklist

  1. Update payroll master. Revise the daily and monthly rates against each worker in the payroll system with effect from 01 April 2026.
  2. Reclassify workers correctly. Confirm each worker is tagged to the correct Zone (I or II) and skill category. Misclassification is one of the most common findings in labour inspections.
  3. Wage register & wage slip. Ensure Form XVII (wage register) and Form XIX (wage slip) reflect the revised Basic and V.D.A. components separately.
  4. Statutory deductions. Review the downstream impact on ESIC, EPF, Professional Tax and Labour Welfare Fund contributions where these are computed on gross wages.
  5. Contract labour & outsourced staff. Cross-check that contractors and manpower agencies engaged by the establishment are also paying the revised minimum. The principal employer’s liability under the Contract Labour (Regulation & Abolition) Act, 1970 continues.
  6. Notice board. Update the notice of rates of wages displayed at the workplace, as required under Section 18 of the Act.
  7. Retain the notification. Keep a copy of the Gujarat notification on file for inspection.

Penalty for non-compliance

Under the Minimum Wages Act, 1948 (read with the Code on Wages, 2019, once fully notified), paying less than the notified minimum wage is a punishable offence. The Authority may also direct the employer to pay the shortfall to the workers along with compensation, which may extend to ten times the amount of such shortfall. In practice, the financial exposure from back-wages, compensation and interest can far exceed the statutory fine — which is why periodic internal audits of payroll compliance are worth the investment.

 

Frequently asked questions

Is the “Per day” rate gross or net?

The “Per day” rate is the gross statutory minimum payable to the worker for a working day. Statutory deductions such as EPF, ESIC and PT continue to apply on top of this, per the respective statutes.

Is V.D.A. mandatory over and above Basic?

Yes. V.D.A. must be paid in addition to the Basic wage, or merged into the Basic, so long as the total is not less than the notified “Per day” rate. Paying only the Basic component (without V.D.A.) is non-compliance.

Does this notification apply to contract workers?

Yes. Contract workers engaged through a manpower vendor or licensed contractor are entitled to the same minimum wage. The principal employer remains liable if the contractor defaults.

Is a worker in Vadodara Municipal Corporation limits in Zone I or Zone II?

Vadodara Municipal Corporation is a Municipal Corporation, so it falls under Zone I. Areas outside the Corporation limits generally fall under Zone II — refer to the notification for the specific area boundaries.

What if the worker is paid a monthly salary that already exceeds the minimum monthly figure?

Compliance is measured on the “Per day” rate. If the monthly salary divided by the number of working days in the wage period is at least equal to the notified “Per day” rate, the employer is compliant. Ensure this holds even in months with fewer working days.

Does the revision apply to apprentices and trainees?

Apprentices covered under the Apprentices Act, 1961 are governed by that Act’s stipend rates. Trainees not covered by the Apprentices Act are treated as workers and are entitled to the minimum wage.

How CSM & Co LLP can help

At CSM & Co LLP, Chartered Accountants, we work with employers across Gujarat on Internal Audit, Tax and MIS Dashboards. As part of these engagements, we regularly cover payroll and labour law compliance areas including:

  • Reviewing the payroll register for correct application of the revised Gujarat minimum wages
  • Auditing contractor and manpower vendor wage compliance for the current cycle
  • Assessing exposure under ESIC, EPF, Professional Tax and Labour Welfare Fund
  • Building a periodic MIS dashboard for tracking labour law compliance and payroll KPIs

Please reach out to our team and we will be happy to assist.

Disclaimer

The rates and provisions summarised above are based on the notification issued by the Labour & Employment Department, Government of Gujarat. While every effort has been made to ensure accuracy, employers are advised to refer to the official Gujarat Government notification (ક્રમાંક: પ.લ.મ.૬/ટ.૩/૨૦૨૬/૧૪૨ થી ૧૬૪, dated 01-04-2026) for the authoritative text before acting. This post is for general information and does not constitute legal or professional advice.

Income Tax Refund: How It Is Claimed, Interest on Refund, Set-Off and Tax on the Interest (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 25 August 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A refund is due when tax paid, including TDS, TCS and advance tax, is more than the tax properly chargeable (section 431), and it is claimed only by filing a return under section 263 (section 433).
  • The department pays simple interest at 0.5% for every month or part of a month (section 437): from 1 April of the next year if the return is filed by the due date, and from the date of filing if it is filed late.
  • No interest is paid if the refund is less than 10% of the tax determined on the return.
  • The refund is not income, but the interest on it is taxed as income from other sources.
  • The department can set the refund off against any tax still payable and may hold it for up to 60 days after a pending assessment is made.

A refund arises when you have paid, or had deducted, more tax than you owe. Chapter XX of the Income-tax Act, 2025 (sections 431 to 438) says who gets it, how it is claimed and what interest is paid. This post covers those rules for tax year 2026-27.

When a refund is due

Section 431: where the tax paid by you or on your behalf, or treated as paid by you, for a tax year exceeds the amount with which you are properly chargeable, you are entitled to a refund of the excess. The tax paid includes TDS, TCS, advance tax and self-assessment tax.

If the income of one person is included in another’s total income, only the latter can claim the refund for that income (section 432(1)). If a person cannot claim a refund because of death, incapacity, insolvency or liquidation, his legal representative, trustee, guardian or receiver can claim it for the benefit of the person or the estate (section 432(2)).

How to claim

Every claim for refund is made by furnishing a return under section 263 (section 433). A salaried person whose employer deducted more tax than needed, a person whose TDS is higher than tax, or a person who paid excess advance tax shows the excess as refund in the return. A return filed late can still claim a refund, subject to the time limits for returns (see our post on belated, revised and updated returns).

The refund is paid after the return is verified and processed. The department credits it to your bank account, so the bank details in your return must be correct. Track the status on the e-filing portal.

Interest on refund (section 437)

The department pays simple interest at 0.5% for every month or part of a month.

Refund out of Interest runs
TDS, TCS or advance tax paid in the financial year From 1 April of the year following the tax year to the date of refund, if the return was filed on or before the due date; from the date of filing the return to the date of refund, in any other case
Tax paid under section 266 (self-assessment tax) From the date of the return or of payment of tax, whichever is later, to the date of refund
Any other case (tax or penalty paid in excess of a notice of demand) From the date of excess payment to the date of refund

No interest is payable on a refund of TDS, TCS, advance tax or self-assessment tax if the refund is less than 10% of the tax determined on processing the return or on regular assessment (section 437(2)).

Example. Tax year 2026-27. Tax on your return is ₹60,000; TDS is ₹80,000, so the refund is ₹20,000, which is 33% of the tax. You file on time, and the refund is credited on 15/09/2027.

  • Interest runs from 1 April 2027 to 15 September 2027: April, May, June, July, August and part of September, which is 6 months.
  • Interest = 0.5% × 6 × ₹20,000 = ₹600.

If you file after the due date, interest runs only from the date of filing.

Is the refund taxable?

  • The refund of tax is not income. It is only a return of tax you had already paid.
  • The interest on the refund is income and is taxed under the head Income from other sources (section 92(1)), at your slab rate. Report it in the return for the year in which you receive it, as part of your interest income, and take credit for any TDS shown against it.

Example. The ₹600 interest above is added to your income. At a 30% slab with 4% cess, the tax is 600 × 30% × 1.04 = ₹187.

Set-off and withholding (section 438)

  • The department may, instead of paying the refund, set it off against any sum remaining payable by you under the 1961 Act or the 2025 Act. It must first give you written intimation of the proposed action. Reply to that intimation if you dispute the demand or have already paid it.
  • If a refund is due and an assessment or reassessment is pending, the Assessing Officer may withhold the refund, for reasons recorded in writing and with the previous approval of the Principal Commissioner or the Commissioner, up to 60 days from the date on which the assessment or reassessment is made.

Refund on appeal

If an appeal or other proceeding results in a refund, the Assessing Officer must refund it without your making a claim (section 435(1)), except in the cases in the section such as a fresh assessment being directed, where the refund becomes due only when the fresh assessment is made.

Why a refund may be late

Interest at 0.5% a month compensates for delay in paying a refund. Common reasons for delay:

  • the return is not e-verified, so it is not processed;
  • TDS shown in the return does not match the TDS statements, and the department adjusts it;
  • an outstanding demand for another year, which may be adjusted against the refund;
  • bank account details that do not match;
  • a pending assessment or scrutiny, which can hold the refund for up to 60 days after the assessment is made.

Check the intimation you receive after processing, and respond on the portal if you disagree. If a refund has been issued but not received because of a bank issue, you can ask for it to be re-issued through the portal.

Points to remember

  1. Claim a refund only by filing the return; there is no other route (section 433).
  2. File on time. A timely return earns interest from 1 April of the next year; a late one only from the date of filing.
  3. Interest on refund is taxable; the refund is not.
  4. A refund of less than 10% of the tax earns no interest.

Frequently asked questions

How do I claim an income tax refund?

File a return of income under section 263. A claim for refund can be made only by furnishing a return (section 433). If TDS, TCS or advance tax exceeds your liability, the excess is shown as refund in the return.

How much interest do I get on a refund?

Simple interest at 0.5% for every month or part of a month (section 437). For refund of TDS, TCS or advance tax, it runs from 1 April of the year after the tax year to the date of refund if you filed on time, or from the date of filing if you filed late.

When is no interest paid?

When the refund is less than 10% of the tax determined on processing the return or on regular assessment (section 437(2)), in the cases of TDS, TCS, advance tax and self-assessment tax refunds.

Is a refund taxable?

The refund of tax is not income. The interest you receive on it is taxable as income from other sources, at your slab rate (section 92).

Can the department keep my refund?

It can set off the refund against any tax still payable under the 1961 Act or the 2025 Act, after giving you written intimation (section 438(1) and (2)). If an assessment is pending it may withhold the refund for up to 60 days from the date the assessment is made, for recorded reasons and with approval (section 438(3)).

Who claims the refund of a person who has died?

The legal representative, trustee, guardian or receiver, for the benefit of the person or his estate (section 432(2)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

EPF vs EPS: Differences in Contribution, Withdrawal, Pension and Tax

Posted on by CA Meet Dhrangadhariya

Last updated: 09 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • EPF is your retirement savings (12% from you, 12% from the employer, with interest). EPS is a pension scheme funded only by the employer.
  • Out of the employer’s 12%, 8.33% goes to EPS (on wages up to Rs 15,000, so at most Rs 1,250 a month) and the rest, 3.67%, goes to EPF.
  • EPF pays a lump sum with interest. EPS pays a monthly pension from age 58, or a one-time withdrawal benefit if you leave before 10 years of service.
  • Since the EPFO decision of 13/10/2025, premature final settlement of EPF needs 12 months of unemployment (earlier two months) and EPS withdrawal 36 months.

Both the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS) run under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and are managed by the EPFO. They are two parts of the same deduction on your payslip, but they do different jobs: EPF is a savings pot that you take as a lump sum, EPS is a pension.

What is EPF?

Both you and your employer contribute 12% of your wages (basic salary plus dearness allowance) to your EPF account every month. The balance earns interest declared by the government each year, and you can take the whole amount at retirement. Of the employer’s 12%, only part reaches this account, as explained below.

What is EPS?

EPS pays a monthly pension to the member after retirement, and to the family on the member’s death. You do not contribute to it. It is funded from the employer’s 12%: 8.33% of wages goes to EPS and the remaining 3.67% goes to EPF.

EPF and EPS side by side

Point EPF EPS
Your contribution 12% of wages Nil
Employer contribution 3.67% of wages 8.33% of wages (wages counted up to Rs 15,000, so at most Rs 1,250 a month)
Interest Yes, declared every year No interest, it is a pension entitlement
What you receive Lump sum of contributions plus interest Monthly pension, or a withdrawal benefit if service is under 10 years
Pension age Not applicable 58 years (reduced early pension possible from 50)
Who is covered Employees of covered establishments; wages up to Rs 15,000 are compulsory, above that by joint option Members who joined before 58 and whose wages are counted up to the ceiling

Withdrawal rules after the October 2025 changes

On 13/10/2025 the EPFO Central Board of Trustees decided to simplify withdrawals. As reported at the time:

  • Partial withdrawals are merged into three heads (essential needs, housing, special circumstances), with a uniform minimum service of 12 months.
  • Premature final settlement of the EPF balance now needs 12 months of unemployment, earlier two months.
  • Final withdrawal of the pension (EPS) balance now needs 36 months, earlier two months.
  • 25% of contributions is to be kept as a minimum balance in the account.

Reports from mid-2026 say the Government has since notified the EPF Scheme, 2026 (stated to be effective from 29/06/2026) to give effect to these changes. Reports differ on the exact waiting period for the balance on leaving a job, so read the current text of the Scheme and EPFO circulars on the EPFO website before you apply. Retirement at 58 is unchanged.

Tax on EPF and EPS

  • Interest on EPF: tax free on your contributions up to Rs 2.5 lakh a year (Rs 5 lakh if there is no employer contribution). Interest on the excess is taxable every year.
  • Employer contribution: the employer’s contribution to EPF, NPS and superannuation together above Rs 7.5 lakh a year is taxed as a perquisite in your hands.
  • Withdrawal before five years of continuous service: TDS applies on the taxable part if the amount is more than Rs 50,000. Withdrawal after five years is not taxed.
  • EPS pension: taxable as salary in the year you receive it.
  • Section 80C: your EPF contribution qualifies only if you choose the old tax regime.

Which one matters to you?

If you plan to leave a job before 10 years, check your EPS service on the passbook and decide between the withdrawal benefit and carrying the service forward with a scheme certificate. For long-term savings, EPF is the bigger balance. If your wages are above Rs 15,000, ask whether your employer contributes on the actual wage or on Rs 15,000.

Frequently asked questions

Do I contribute to EPS?

No. EPS is funded by the employer’s share only (8.33% of wages, with wages counted up to Rs 15,000 a month). Your own 12% goes entirely to EPF.

How much of the employer’s 12% goes to EPS?

8.33% of wages goes to EPS and the balance 3.67% goes to EPF. For wages above Rs 15,000 the EPS part is capped at Rs 1,250 a month unless the higher pension option was exercised.

Does EPS earn interest?

No. EPS builds service and pensionable salary, not a balance. EPF earns interest declared by the government every year.

At what age does EPS pension start?

At 58. A reduced early pension is possible from age 50, as long as you have 10 years of service.

Can I withdraw the EPS amount if I leave a job early?

If you have less than 10 years of service you can take a withdrawal benefit, or get a scheme certificate to carry the service to the next employer. Final pension withdrawal now needs 36 months out of employment.

Is EPF interest taxable?

Interest on your own contributions up to Rs 2.5 lakh a year is tax free (Rs 5 lakh if there is no employer contribution). Interest on the part above the limit is taxable.

Official sources

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Set-Off and Carry Forward of Losses: Business, House Property, Capital Gains and Depreciation (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 20 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A loss is set off first within the same head, then against income under other heads, then carried forward (sections 108 to 115 of the Income-tax Act, 2025).
  • House property loss: ₹2 lakh against other heads, balance for 8 years against house property income. Business loss: against any head except salary, then for 8 years against business profits. Speculation loss: 4 years, only against speculation profit. Capital loss: not against other heads; 8 years against capital gains.
  • Unabsorbed depreciation carries forward without any time limit (section 33(11)).
  • Business, capital gains and speculation losses can be carried forward only if the return of the loss year was filed by the due date (section 121); a company with a change of 51% or more in voting power loses its brought forward losses (section 119).

A loss reduces tax only if it can be set off or carried forward. The Income-tax Act, 2025 deals with this in Chapter VII (sections 108 to 121). The sections replace sections 70 to 80 of the 1961 Act.

Step 1: set off within the same head (section 108)

If the result from one source under a head (other than capital gains) is a loss, it is set off against income from any other source under the same head in the same tax year. For capital gains (section 108(2)):

  • a short-term capital loss is set off against any capital gain, short-term or long-term;
  • a long-term capital loss is set off only against long-term capital gains.

Step 2: set off against other heads (section 109)

If a head (other than capital gains) shows a loss after step 1, it is set off against income under any other head, including capital gains, with two limits:

  • a business or profession loss cannot be set off against salary (section 109(1)(a));
  • a house property loss can be set off against other heads only up to ₹2,00,000 (section 109(1)(b)).

A capital loss cannot be set off against any other head (section 109(2)).

Step 3: carry forward

Loss Carry forward Set off against Section
House property 8 tax years House property income only 110
Capital gains 8 tax years Capital gains, short-term loss against any gain, long-term loss against long-term gains 111
Business or profession (not speculation) 8 tax years Profits of any business or profession 112
Speculation business 4 tax years Profits of speculation business only 113
Specified business under section 46 Not limited in the text Profits of another specified business only 114
Specified activity (owning and maintaining race horses) 4 tax years Income from that activity only 115
Unabsorbed depreciation No time limit Added to the depreciation of the next year, effect first being given to the business loss under section 112(3) 33(11)

Order of set off: brought forward business loss is given effect first; any unabsorbed depreciation is then added to the next year’s depreciation (section 112(3)).

The eight years are counted from the year after the year in which the loss was first computed (“eight tax years immediately succeeding”).

Conditions

File the return on time (section 121)

Irrespective of anything contained in the Chapter, a loss that has not been determined in a return filed under section 263(1) cannot be carried forward and set off under sections 111(1), 112(1), 113(2), 114(2) or 115(2). That is, to carry forward a capital gains, business, speculation, specified business or specified activity loss, the return of the loss year must be filed by the due date, and the loss must be shown in it.

House property loss (section 110) and unabsorbed depreciation (section 33(11)) are not in the list of section 121.

Changes in constitution (section 119)

  • Partner leaves or dies: the firm cannot carry forward the portion of the loss proportionate to a retired or deceased partner’s share that exceeds his share of profits in the year (section 119(1)).
  • Succession of business: where a business or profession is taken over by another person other than by inheritance, only the person who incurred the loss can carry it forward (section 119(2)).
  • Change in shareholding of a company (a company in which the public are not substantially interested): the loss of an earlier year can be set off only if, on the last day of the tax year, shares carrying at least 51% of the voting power are beneficially held by the same persons who held at least 51% on the last day of the year in which the loss was incurred (section 119(3)(a)).
    - Eligible start-ups (section 140) can carry forward losses incurred in the first ten years from incorporation if all the shareholders on the last day of the loss year continue to hold their shares at the end of the current year (section 119(3)(b)).
    - The rule does not apply when the change is due to the death of a shareholder, a gift to a relative, certain amalgamations or demergers of a foreign parent, and the other cases in section 119(4).

Reorganisations

On amalgamation or demerger of specified companies, the accumulated losses and unabsorbed depreciation pass to the successor if the conditions of sections 116 to 118 are met (an industrial undertaking or a ship or hotel company amalgamated with another company, public sector company amalgamations, a firm or proprietorship succeeded by a company, and others).

New regimes and loss set-off

A person who is taxed under the new regime (section 202), or under the concessional rates for companies and co-operative societies (sections 200, 201, 203, 204), computes income without certain deductions and without set off of losses or depreciation attributable to them; those losses are deemed to have been given effect to and lapse. House property loss cannot be set off against other heads in the new regime (section 202(2)(b)(ii)). See our posts on the regime option and on corporate tax.

Examples

1. Order of set off. Tax year 2026-27, old regime. Salary ₹10,00,000, house property loss ₹2,50,000, business loss ₹3,00,000, no other income.

  • House property loss: only ₹2,00,000 can be set off against other heads, here against salary, leaving taxable salary of ₹8,00,000. The other ₹50,000 is carried forward for 8 years against house property income.
  • Business loss: cannot be set off against salary. The whole ₹3,00,000 is carried forward for 8 years against business profits, provided the return is filed by the due date.

2. Unabsorbed depreciation. Profit before depreciation ₹3,00,000, depreciation ₹5,00,000: ₹3,00,000 is allowed, ₹2,00,000 is carried forward with no time limit.

3. Late return. Business loss of ₹4,00,000 in tax year 2026-27, return filed on 15/12/2027 (belated). Under section 121, the loss cannot be carried forward, because the return was not under section 263(1). It could still have been set off in 2026-27 against other income (not salary).

Practical points

  • Always file the return on time in a loss year, even if no tax is due.
  • Show the loss in the loss schedules of the return, by year of origin.
  • Track expiry: the 8 year clock runs from the year the loss was computed.
  • A company should watch the 51% shareholding test at each change in ownership.

Frequently asked questions

In what order are losses set off?

First against other income under the same head in the same year (section 108), then against income under other heads, subject to the limits (section 109), and the balance is carried forward (sections 110 to 115).

Can a business loss be set off against salary?

No. A loss under Profits and gains of business or profession cannot be set off against salary income (section 109(1)(a)). It can be set off against other heads, such as house property, capital gains or other sources.

For how long can a business loss be carried forward?

For eight tax years immediately after the year in which it was first computed, against profits of any business or profession (section 112). A speculation loss can be carried forward for four years, only against speculation profits (section 113).

Does unabsorbed depreciation lapse?

No. It is added to the depreciation allowable in the next year and so on, without a time limit (section 33(11)).

Do I need to file the return on time to carry forward a loss?

For losses under sections 111, 112, 113, 114 and 115 (capital gains, business, speculation, specified business and specified activity), yes: a loss not determined in a return filed under section 263(1) by the due date cannot be carried forward and set off (section 121).

What happens to a company’s losses if the shareholding changes?

For a company in which the public are not substantially interested, a loss of an earlier year cannot be set off against the income of a year in which the shareholders holding 51% of the voting power on the last day of the loss year no longer hold that 51% on the last day of the current year. Eligible start-ups have an exception (section 119(3)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Corporate Tax Rates for Tax Year 2026-27: 25%, 22%, 15% Regimes, MAT at 14% and AMT

Posted on by CA Meet Dhrangadhariya

Last updated: 25 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A domestic company pays 25% if its turnover in tax year 2024-25 was up to ₹400 crore and 30% otherwise (Finance Act, 2026), or can opt for 22% under section 200 (earlier 115BAA); a new manufacturing company set up from 1 October 2019 that began production by 31 March 2024 can pay 15% under section 201 (earlier 115BAB).
  • The option under sections 199 to 201 must be exercised by the return due date and cannot be withdrawn; these companies give up most deductions and the related carry forward losses.
  • Minimum alternate tax is now 14% of book profit (earlier 15%), does not apply to a company that opted for section 200 or 201, and from 1 April 2026 gives no new credit; old MAT credit can be used up to 25% of tax payable.
  • Non-corporate persons claiming certain deductions pay alternate minimum tax at 18.5% of adjusted total income, with credit carried forward for 15 years.

A company’s tax depends on which regime it is in. For tax year 2026-27, the Income-tax Act, 2025 and the Finance Act, 2026 give a base rate and three concessional options, plus minimum alternate tax for companies that pay little regular tax. This post summarises them.

Base rates (Finance Act, 2026)

Company Rate
Domestic company whose total turnover or gross receipts in tax year 2024-25 did not exceed ₹400 crore 25%
Other domestic company 30%
Company other than a domestic company (foreign company) 35% on the balance of income (50% on specified old royalty and technical fee agreements)
Firm and local authority 30%

Surcharge (companies): domestic company, 7% if total income exceeds ₹1 crore and does not exceed ₹10 crore, and 12% above ₹10 crore; a company that opts for section 200 or 201, a flat 10%; foreign company, 2% above ₹1 crore up to ₹10 crore and 5% above ₹10 crore; and a firm 12% above ₹1 crore. Cess is 4%.

The concessional options

Section 200 (earlier 115BAA): 22%

Any domestic company may opt to pay 22%, if its total income is computed:

  • without the deductions under Chapter VIII (other than section 146 for new employment and section 148 for inter-corporate dividends), section 45(2) or 47(1)(b), or the sections listed in section 205(1)(a) to (g); and
  • without set-off of brought forward loss or depreciation attributable to those deductions (section 200(1)).

Those losses and depreciation are treated as having been given full effect, so they lapse (section 200(3)). The option:

  • must be exercised on or before the due date for the first return the company must file (section 200(5));
  • cannot be withdrawn once exercised (section 200(6)); and
  • becomes invalid from the year in which the company fails to meet the conditions, after which the general rules apply (section 200(2)).

MAT does not apply to a company that has exercised this option (section 206(1)(q)(ii)).

Section 201 (earlier 115BAB): 15% for new manufacturing companies

A domestic company engaged in manufacture or production of an article or thing can opt for:

Income Rate
Total income other than the items below 15%
Income not derived from or incidental to manufacturing or production, with no specific rate under other provisions (no expenditure deduction) 22%
Short-term capital gains on assets on which no depreciation is allowable 22%
Income deemed under section 205(4) 30%

Conditions: the option is exercised on or before the due date for the first return; the company was set up and registered on or after 1 October 2019; it commenced manufacturing or production on or before 31 March 2024; total income is computed without the deductions as for section 200; and the conditions in section 201(5) and section 205(2) are fulfilled. Because of the cut-off date for starting production, this option is closed for new companies.

Section 199: 25% for companies set up from 1 March 2016

A domestic company set up and registered on or after 1 March 2016, engaged only in manufacture or production (and research and distribution of its own products), may opt for 25%, if income is computed without the specified deductions. Since the base rate is 25% for companies up to ₹400 crore turnover, this option is mainly of historical interest. An option under section 199 can be exchanged for section 200 (section 199(4)).

Minimum alternate tax (section 206(1))

Where the tax on a company’s total income is less than the minimum alternate tax (MAT), the book profit is deemed to be total income and the company pays MAT.

  • Rate: 14% of book profit (reduced from 15% by the Finance Act, 2026, from 1 April 2026); 9% for a unit in an International Financial Services Centre earning in foreign exchange.
  • Not applicable to a company that has exercised the option under section 200(5) or 201(2), and to a company with life insurance business income taxed under section 194(1), among others.
  • Book profit is the profit in the statement of profit and loss as prepared under Schedule III of the Companies Act (or the governing enactment), increased by income tax and provision, reserves, provisions for unascertained liabilities, dividends, depreciation, deferred tax and other items listed in section 206(1)(c), and reduced by items such as depreciation (excluding revaluation depreciation), brought forward loss or unabsorbed depreciation (whichever is less), and the other deductions listed there.
  • A report from an accountant certifying the book profit is required before the specified date in section 63.

No new MAT credit; old credit

  • From 1 April 2026, MAT paid gives no credit: the clauses allowing credit for the excess of MAT over regular tax and its carry forward were omitted by the Finance Act, 2026. MAT is effectively a final tax.
  • Credit brought forward from the 1961 Act (section 115JAA) as on 31 March 2026 survives only for a domestic company that opts under section 200(5) or 201(2) for a tax year beginning on or after 1 April 2026. The credit can be set off up to 25% of the tax payable on the total income of the year, and the balance carried forward, but not beyond the 15th tax year from the year the credit first arose (section 206(3)).
  • A foreign company can set off its brought forward credit in a year when its tax exceeds MAT, within the same 15 year limit (section 206(4)).

Alternate minimum tax for non-corporates (section 206(2))

An assessee who is not a company and who claims a deduction under Chapter VIII-C (other than section 149) or section 46 pays alternate minimum tax (AMT) if regular tax is lower:

  • Rate: 18.5% of the adjusted total income; 15% for a co-operative society; 9% for an IFSC unit.
  • Adjusted total income: total income plus the deductions claimed under Chapter VIII-C and under section 46 (reduced by the depreciation allowable on the assets).
  • Does not apply to a person who has opted under section 203(5) or 204(2), a person taxed under section 202(1) (the default new regime), an individual, HUF, AOP or BOI whose adjusted total income is ₹20 lakh or less, and a specified fund.
  • Credit: the excess of AMT over regular tax is carried forward and set off when regular tax exceeds AMT, up to the 15th year, without interest.
  • A report in the prescribed form from an accountant is required before the specified date in section 63.

Choosing a regime

Question Section 200 (22%) Base rate (25% or 30%)
Deductions (for example, Chapter VIII, section 45(2)) Largely not available Available
Losses and unabsorbed depreciation attributable to those deductions Lapse Carried forward
MAT Not applicable Applies if regular tax is lower than 14% of book profit
Reversal Not possible N/A

For most companies without significant deductions, section 200 reduces the rate and removes MAT. A company with large brought forward losses from claimed deductions, or with big incentives, should compare before opting, because the option is irreversible.

Frequently asked questions

What is the corporate tax rate for tax year 2026-27?

For a domestic company, 25% if its total turnover or gross receipts in tax year 2024-25 did not exceed ₹400 crore, otherwise 30%; 22% under section 200 if it opts in; and 15% under section 201 for a qualifying new manufacturing company. A company other than a domestic company pays 35% (Finance Act, 2026). Add surcharge and 4% cess.

Who can opt for the 22% rate under section 200?

Any domestic company, by exercising the option on or before the due date for the first return it must file. It computes income without most deductions and without set-off of losses attributable to them, and cannot later withdraw the option.

What is the 15% rate under section 201?

A domestic company engaged in manufacture or production, set up and registered on or after 1 October 2019, which commenced production by 31 March 2024, and which meets the other conditions in sections 201 and 205. Other income is taxed at 22%, and certain short-term gains and deemed income at special rates.

What is MAT now?

Minimum alternate tax is 14% of book profit (9% for an IFSC unit), reduced from 15% from 1 April 2026. It applies where the company’s regular tax is less than the MAT, and does not apply to a company that has opted for section 200 or 201 (section 206(1)).

Can MAT credit still be claimed?

No fresh MAT credit arises from 1 April 2026, because the credit clauses were omitted. Credit brought forward from the 1961 Act can be set off by a domestic company that has opted under section 200 or 201, up to 25% of the tax payable, and within 15 years of the year in which it arose (section 206(3)).

What is alternate minimum tax?

A tax of 18.5% (15% for a co-operative society, 9% for an IFSC unit) on adjusted total income of a person other than a company who has claimed deductions under Chapter VIII-C or section 46, where regular tax is lower. It does not apply to a person taxed under section 202(1) or whose adjusted total income is up to ₹20 lakh (section 206(2)).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.