Section 201 of Income-tax Act, 2025: Who Qualifies for the 15% Manufacturing Company Tax Rate?
Section 201 provides an optional concessional tax regime for eligible new domestic manufacturing companies. The 15% rate applies only to qualifying income, and the law separately specifies 22% and 30% rates for certain other income.
What tax rates apply under Section 201(1)?
Subject to the provisions of Parts A, B, E and Part C of Chapter XIII (other than Sections 199 and 200), an eligible domestic manufacturing company may opt for the following rates:
| Income category | Statutory rate |
|---|---|
| Qualifying total income other than the categories below | 15% |
| Income neither derived from nor incidental to manufacturing or production, where no separate specified rate applies; no deduction or allowance for expenditure is permitted against this income | 22% |
| Short-term capital gains on transfer of a capital asset on which no depreciation is allowable | 22% |
| Income deemed under Section 205(4) | 30% |
These are statutory base rates. Applicable surcharge and health and education cess must be considered separately, where required.
Who is eligible for the 15% rate?
Under Section 201(1), the assessee must be a domestic company engaged in manufacturing or producing an article or thing. It must:
- Exercise the option in the prescribed manner under Section 201(2).
- Have been set up and registered on or after 1 October 2019.
- Have commenced manufacture or production on or before 31 March 2024.
- Compute its total income according to Section 201(3).
- Comply with Section 201(5) and the additional conditions in Section 205(2), including restrictions relating to reconstruction, machinery and business activities.
How is the option exercised under Section 201(2)?
The company must exercise the option in the prescribed manner on or before the due date under Section 263(1) for furnishing the first relevant return of income. Once exercised, the option applies to subsequent tax years and cannot be withdrawn.
If the company fails to meet the conditions specified in the eligibility table for a tax year, the option becomes invalid for that year and subsequent years. The ordinary provisions of the Act then apply as if the option had not been exercised for those years.
Which deductions and losses are restricted?
Section 201(3) requires total income to be computed without deductions under Section 45(2), Section 47(1)(b), Chapter VIII (except Sections 146 and 148), and the provisions listed in Section 205(1)(a) to (g).
Losses and unabsorbed depreciation deemed under Section 116 that are attributable to these disallowed deductions cannot be set off. Under Section 201(4), such losses or depreciation are treated as fully given effect to and cannot be deducted in later tax years.
What happens if the company amalgamates?
Under Section 201(5), the option continues in the case of the amalgamated company only if the conditions in Section 201(1), Table Sl. No. 1.D, continue to be fulfilled.
Relevant statutory definitions and expressions
Frequently asked questions
Can a company that started manufacturing in 2025 claim 15% under Section 201?
No. Section 201 requires manufacturing or production to have commenced on or before 31 March 2024, along with the other conditions.
Does the 15% rate apply to every receipt of an eligible company?
No. Section 201 separately prescribes 22% for specified non-manufacturing income and certain short-term capital gains, and 30% for income deemed under Section 205(4). Other specifically taxed income remains subject to applicable provisions.
Can a company withdraw the option after choosing this regime?
No. Section 201(2)(c) expressly makes the option irrevocable.
What was the corresponding provision under the Income-tax Act, 1961?
Section 115BAB was the corresponding concessional regime for new manufacturing domestic companies under the earlier Act.
Official statutory references
Updated: 11 November 2026. This article explains the statutory provision and should be read with the applicable rules and current notifications.