When it comes to promoting ease of doing business and encouraging entrepreneurship in India, tax incentives play a vital role. The Indian government has introduced several measures to reduce the tax burden on new manufacturing companies and startups.
One such important provision is Form 10IB of Income Tax Act, which is directly linked with Section 115BA of the Income Tax Act.
This form allows eligible domestic manufacturing companies to opt for a concessional tax rate of 25%, provided they fulfill specific conditions. Timely filing of this form is crucial for availing the benefits.
Understanding how to file ITR online also becomes essential, as Form 10IB must be submitted before the ITR due date to ensure companies can legally opt for this lower tax rate and avoid unnecessary compliance issues.
Let’s understand the purpose, eligibility, process of filing, key benefits, and consequences of non-filing of Form 10IB of Income Tax Act.
What is Form 10IB Under the Income Tax Act?
Form 10IB is an online declaration form that must be filed by domestic companies engaged in manufacturing to opt for a lower corporate tax rate under Section 115BA of the Income Tax Act. This provision was introduced as part of the government’s broader efforts to incentivize Make in India initiatives and attract investments.
The reduced tax rate of 25% (plus applicable surcharge and cess) is applicable only when the company opts for it by filing Form 10IB within the specified timeline.
Importance of Form 10IB for Businesses and Startups
For new businesses and startups, managing taxes efficiently is crucial for preserving working capital and fueling growth. Filing Form 10IB of Income Tax Act enables eligible manufacturing companies to benefit from a reduced tax burden during their early stages.
Who Needs to File Form 10-IB?
Not all companies are eligible to file Form 10IB. The Income Tax Act outlines clear guidelines for who can file this form and benefit under Section 115BA.
Eligibility Criteria for Filing
A company must fulfill the following conditions to file Form 10IB:
- It should be a domestic company incorporated on or after March 1, 2016.
- The company must be engaged in the business of manufacturing or production of an article or thing.
- It should not claim any deductions under Sections 10AA, 35AD, 35CCC, or any provisions under Chapter VI-A other than Section 80JJAA.
- It should not be engaged in any business other than manufacturing or production.
- The option to file Form 10IB of Income Tax Act must be exercised on or before the due date for filing the income tax return under Section 139(1).
Specified Companies and Startups Under Section 115BA
Section 115BA is meant for manufacturing companies, and this includes startups engaged exclusively in such operations. It does not cover trading, service-based, or investment companies. Additionally, stock advisory companies or those providing financial services are not eligible under this section unless they have a distinct manufacturing arm.
Purpose of Filing Form 10IB
The government provides a concessional tax regime to promote manufacturing in India. Form 10IB of Income Tax Act serves as the declaration to avail this benefit.
Opting for Concessional Tax Rate Under Section 115BA
By filing Form 10IB, a company formally opts to be taxed under Section 115BA, which means:
- 25% basic tax rate (plus surcharge and cess)
- No MAT (Minimum Alternate Tax) applicability under this section
- Must forgo certain exemptions and deductions
Reducing Corporate Tax Burden
Corporate tax is often one of the largest expenses for a company. By opting for the concessional tax regime, the overall effective tax liability reduces significantly, especially in the formative years of the business.
Key Conditions for Availing Tax Benefits Using Form 10IB
While the tax benefit under Section 115BA is attractive, it comes with certain conditions and restrictions.
Turnover Limits
Unlike other tax provisions like those applicable to MSMEs, Section 115BA does not impose a turnover limit. However, the company must be engaged exclusively in manufacturing and must not be formed by splitting or reconstruction of an existing business.
Restrictions on Certain Deductions and Incentives
The company opting for this concessional rate must not claim deductions under the following sections:
- Section 10AA (SEZ units)
- Section 32(1)(iia) (Additional depreciation)
- Section 35AD, 35CCC (Expenditure on specified business or skill development)
- Chapter VI-A deductions (except 80JJAA for employment generation)
This exclusion of incentives must be carefully evaluated before filing.
Step-by-Step Process to File Form 10IB
Filing Form 10IB is an entirely online process via the Income Tax e-filing portal. Here’s how to do it:
Timeline for Filing Form 10-IB
- The form must be filed before the due date of ITR filing under Section 139(1), typically July 31st for companies not subject to audit, and October 31st for companies requiring an audit.
Online Submission Procedure on Income Tax Portal
- Log in to the Income Tax Portal (https://www.incometax.gov.in)
- Navigate to e-File > Income Tax Forms > File Income Tax Forms
- Select Form 10-IB from the dropdown
- Fill out the necessary details such as company PAN, date of incorporation, business activity
- Validate financial year and assessment year details
- Submit the form using Digital Signature Certificate (DSC)
- Download the acknowledgment receipt for your records
For those unfamiliar with this process, it’s similar to how individuals file ITR online, just tailored for corporate declarations.
Important Details Required in Form 10-IB
Before starting the filing process, make sure you have the following data ready:
Company Registration Details
- PAN of the company
- Date of incorporation
- Registered business address
- Nature of business (Manufacturing only)
Financial Year and Assessment Year Information
- Details of the relevant financial year
- Corresponding assessment year
- Confirmation that the company will adhere to the terms of Section 115BA
Consequences of Non-Filing or Incorrect Filing
Companies that fail to file Form 10IB of Income Tax Act or make errors in submission can lose out on the concessional tax benefits.
Impact on Availing Lower Tax Rates
If the form is not submitted on time, the company will be automatically taxed under the old tax regime, which is characterized by normal tax rates with all applicable deductions and incentives. This may result in a higher tax outgo.
Penalties and Compliance Issues
While there is no direct penalty under the Act for non-filing of Form 10IB of Income Tax Act, the indirect impact can be significant:
- Higher taxes
- Possible scrutiny from tax authorities
- Compliance mismatch if deductions are incorrectly claimed under the wrong tax regime
Comparison of Taxation With and Without Form 10IB
Let’s understand the financial impact of filing Form 10-IB with a simple illustration.
Illustration of Tax Rates
| Particulars | With Form 10IB(Sec 115BA) | Without Form 10IB(Normal Regime) |
| Total Income | ₹1,00,00,000 | ₹1,00,00,000 |
| Tax Rate | 25% | 30% |
| Tax Payable (Before Cess) | ₹25,00,000 | ₹30,00,000 |
| Effective Tax Liability (Approx.) | ₹26,00,000 | ₹31,20,000 |
Impact on Effective Tax Liability
By opting for Section 115BA through Form 10-IB, the company saves around ₹5 lakh per crore of taxable income.
Recent Amendments Related to Form 10-IB
Updates from Finance Acts and CBDT Notifications
- Finance Act 2020 and subsequent Finance Acts have not made major changes to Section 115BA but introduced Section 115BAA and 115BAB, which offer even lower rates under different conditions.
- However, Form 10-IB continues to be relevant for companies incorporated between March 1, 2016, and September 30, 2019.
- The CBDT occasionally issues circulars clarifying doubts on deductions and timelines, which companies should regularly monitor via the official Income Tax portal or trusted stock advisory company blogs.
Conclusion
For eligible new manufacturing companies, Form 10IB of Income Tax Act is a gateway to significant tax savings. However, the benefits can be availed only if the form is filed accurately and within the stipulated deadline.
Startups and entrepreneurs should assess their eligibility early, compare tax scenarios under different provisions (like 115BAA and the old tax regime), and consult with professionals if necessary.
Whether you are a founder managing your own filings or running a stock advisory company helping others, being aware of these provisions helps optimize taxation and remain compliant.
FAQs
What is the deadline for filing Form 10IB?
It must be filed on or before the due date of filing ITR under Section 139(1), generally July 31 or October 31, depending on whether audit is applicable.
Can a company withdraw once Form 10IB is filed?
No. Once the company opts for taxation under Section 115BA by filing Form 10IB, it cannot withdraw the option in subsequent years.
What if a company misses filing Form 10IB?
Missing the deadline means the company will be taxed at normal corporate tax rates under the old tax regime. It cannot opt for Section 115BA later for that year.
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