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written by | August 29, 2022

Things You Must Know About Form 10-IB in Income Tax

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The Central Board of Direct Taxes, or CBDT, started distributing Form 10-IB to offer entrepreneurs a more affordable tax rate. An option in section 115BA (4) of the Income Tax Act is possible due to the present notification, which amends Rule 21AD of the tax rules. The report states that filing would consider the criteria of paragraph (4) of subsection 115BA of the Income Tax Assessment Act. Are you seeking similar tax benefits for your start-up? Continue reading to find out more about the income tax Form 10-IB

Did you know? The eligible private firms can claim tax breaks via Form 10-IB for any prior year beginning on or after 1 April 2017.

Subdivision 115BA of the Income Tax Act 

For Start-Ups, the Central Board of Direct Taxes released Form 10-IB, which gives them the option of selecting a lower tax rate. The notification adds sub-section 115BA(4) of the Income Tax Act's Rule 21AD, which governs the implementation of options, to the Income Tax laws.

This can be mentioned in Form No. 10-IB, for example, in a report stating that a private firm has the authority to use the requirements under subsection (4) of Section 115BA for any prior year connected to the estimating year beginning on or after April 1, 2017.

  • Through the budget announcement 2020, the finance ministry amended Subsection 115 BAA and BAB of the Income Tax Act, 1961. They grant businesses many tax advantages, including a lower tax rate for local manufacturers. 

  • Presently operational domestic businesses can pay tax at a reduced rate of 22%; however, new businesses founded on or after October 1, 2019, and starting operations before March 31, 2023, can pay the tax at a reduced rate of 15%.
  • These lower tax rates mean giving up several benefits and deductions. Such businesses cannot make any minimal alternative tax claims, but those who choose not to take advantage of the reduced rates will still get incentives at a MAT (Minimum Alternate Tax) of 15%. 
  • These regulations provide guidelines about an individual's income tax liability and govern the obligations of Sections 111A and 112.
  • It covers private firm revenues for any year before the assessment year connected to it. The Form 10-IB income tax applicability begins on April 1st, 2017and is valid thereafter. 
  • Additionally, they let those who adhere to the rules outlined in subsection (2) compute obligations at a 25% rate. 
  • Businesses must maintain continual setup and registration to comply with the standards listed in subsection (1), businesses must maintain continual setup and registration. 
  • The company also can't be active in any markets other than those for production and manufacturing.

Also Read: All About Income Tax and Tds Password Format With Examples

What Is Rule 21AD of Section 115BA? 

Rule 21AD of Section 115BA deals with an individual's or a domestic company's entitlement to employment under the conditions of subsection (4) of section 115BA. Any previous year starting from or after 1st April 2017 is subject to these guidelines. Applicants can utilise Form 10-IB to initiate legal action for these causes. Furthermore, income tax Form 10-IB as per subrule (1), is to be filed online. This can be done using a digital signature or an automated confirmation code. 

The procedure for submitting the form is specified by the regulations from the principal directorate general of income tax. Additionally, it describes the data format, guidelines, and procedures for creating automated verification codes. For questions relating to the verification of the individual filing the form, it refers to sub-rule (2). It will also be responsible for ensuring that the right security, archiving, and retrieval protocols are followed. 

Benefits of Form 10-IB

Companies have the option to apply in accordance with subsection (4) of section 115BA of the Income Tax Act by submitting Form 10-IB. As a result, it permits these flexibilities for any prior year connected to an evaluation year starting on or after 1 April 2017. Form 10 acts as an appeal for the enrolment of either a trust or a corporation under Section 12A of the Income Tax Act, 1961. As a result, company owners can electronically file Form 10 utilising the income tax agency's website. The form under sub-section (4) of section 115BA of the Income Tax Act provides information on the option to apply. Accordingly, it must include the following business information: 

  • Name of the business 
  • Whether this is a domestic company or not  
  • PAN number 
  • Registered address  
  • Established date  
  • Nature of the business of the company. 

Also Read: Income Tax Refund Status Online - Learn How to Check ITR Refund Status Online

Draft of Form No. 10-IB

FORM No. 10-IB

[Rule 21AD, Sub-Rule (1)]

Application for exercise of the option under section 115BA of sub-section (4) of Income Tax Act, 1961

To,

Assessing Officer,

Madam/Sir,

I, ………………………………………………. on behalf of [name and registered address of a company exercising the option under section 115BA sub-section (4)] having (PAN) Permanent Account Number……………………………….. hereby exercise the option referred to in section 115BA sub-section (4) of Income-tax Act, 1961 for previous year 20…- …… and subsequent years.

2. The details of the company are mention below

  • Name of the Company exercising the option under of section 115BA sub-section (4):
  • Whether this is the Domestic company or not :
  • PAN number:
  • Registered Address :
  • Date of an Incorporation :
  • Nature of the business or activities of the Company:

3. I understand that above option has exercised for any previous year, that cannot be subsequently withdrawn for the same or any other previous year.

4. I do hereby further affirm that conditions stipulated in section 115BA of the Act are and must be satisfied by the company.

Place…………..

Date……………

Yours faithfully,

Signature of Principal Officer…………………

Name……………………………………

Designation ………………………….

Address………………………………..

 

Also Read: Income Tax in India: Basics, Slabs and E-filing Process 2022

How to fill Form 10-IB online?

  1. Visit www.Incometax.gov.in to log in to the income tax website. 
  1. Enter the password and user ID (PAN). 
  1. After clicking "e-File," choose "Income Tax Forms." 
  1. Form 10-IB can be selected from the drop-down list. 
  1. Enter specifics like the firm name, PAN number, establishment date, kind of operations or activities, etc. 
  1. Complete the verification information, then select the "Purview and Submit" option. 
  1. The registered email address will get a confirmation email. 

Conclusion:

The Central Board of Direct Taxes issued Form 10-IB in an initiative to provide startups and enterprises with an opportunity to choose a lower tax rate. The alternative to paying income tax at a flat rate of 25% of gross income is available through an application made according to Article 115BA(4) of the Income-tax Act 1961. This is given if the taxpayer complies with certain eligibility requirements. For the fiscal year 2016–17 and thereafter, eligible private enterprises may submit an application for Form 10-IB. Additionally, Form 10-IB must be provided electronically and be confirmed using a digital signature. 

Follow Khatabook for the latest updates, news blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounting.

FAQs

Q: How do I apply for 115BAA?

Ans:

Once a firm chooses to use section 115BAA during a specific fiscal year, it cannot be changed. The CBDT has advised that the choice is in Form 10-IB. Online submission of the form is required, either with a digital signature or an online verification code.

Q: Who can file 10IB of income tax?

Ans:

For Start-Ups, the Central Board of Direct Taxes released Form 10-IB, allowing them to select a lower tax rate. The regulation adds sub-section 115BA (4) of the Income Tax Act's Rule 21AD, which allows for implementing an alternative to income tax legislation.

Q: What if Form 10-IB is not filed?

Ans:

A twenty-two per cent tax rebate is denied to that individual if they fail to provide their option in the required format by the deadline outlined in section 139(I) of the Act.

Q: What is Form 10-IB?

Ans:

In order to exercise the alternative choice, domestic corporations must submit Form 10-IB in accordance with Section 115BAA of the Income Tax Act. The domestic corporation may pay income tax at lower rates of 22 per cent (plus surcharge or fee) by submitting Form 10-IB, provided certain requirements are met.

Q: What are Sections 115BAA and 115BAB of the Income-tax Act, 1961?

Ans:

Any domestic corporation that complies with the requirements listed in Section 115BAA may elect to pay tax at the rate of 22 per cent (plus any relevant surcharge and fee). In order to use the option, Form 10IC must be completed. 

But on the other hand, Section 115BAB gives newly established manufacturing businesses the option of paying a tax rate of 15%. (plus applicable surcharge). In this respect, Form 10-IB must be filed.

Q: How is Form 10-IB different from Form No. 10-B?

Ans:

The foundation of a religious charity, foundation, or institution is covered by Form 10-IB. In contrast, new firms, individuals, or other entities who desire to request a tax rate reduction must complete Form 10-IB, which is applied at a rate of 25% of the overall revenue, granted certain requirements are met.

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The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.