Section 115BAB Income Tax Act: Tax on New Manufacturing Domestic Companies

Section 115BAB of the Income-tax Act, 1961 provided an optional concessional tax regime for eligible new manufacturing domestic companies. From 1 April 2026, the corresponding provision is Section 201 of the Income-tax Act, 2025. The core concessional rate is 15%, subject to statutory eligibility and computation conditions.

Updated: 28 September 2026

Meaning and scope of Section 115BAB

Section 115BAB was introduced to provide a lower corporate tax rate to qualifying domestic companies carrying on manufacture or production of an article or thing. It is an optional regime: a company must satisfy the prescribed conditions and exercise the option within the statutory time limit.

Under the current Income-tax Act, 2025, the corresponding provision is Section 201 - Tax on income of new manufacturing domestic companies. The provision applies to a domestic company engaged in manufacture or production, subject to the conditions in Section 201 and connected provisions including Section 205.

Tax rates under the concessional regime

A company under this regime is also subject to the applicable surcharge and Health and Education Cess. For AY 2026-27, the Income Tax Department states a 10% surcharge for companies opting under Section 115BAB, in addition to applicable cess.

Main eligibility conditions

For the corresponding current regime under Section 201 of the Income-tax Act, 2025, the domestic company must satisfy the statutory conditions. Key conditions include:

• The company must have been set up and registered on or after 1 October 2019.
• It must have commenced manufacturing or production on or before 31 March 2024.
• It must be engaged in the permitted manufacturing or production business and satisfy the connected statutory restrictions.
• Its total income must be computed in accordance with the special computation rules of the concessional regime.
• The prescribed option must be exercised within the applicable due date.

New plant and machinery

The regime restricts the use of previously used plant or machinery, subject to statutory exceptions. Historically, Section 115BAB allowed imported machinery previously used outside India where the specified conditions were met, and provided a limited tolerance where previously used machinery did not exceed the prescribed proportion of total machinery value.

Activities not treated as manufacture or production

The statutory regime excludes specified activities from the qualifying manufacturing concept. Under Section 115BAB these included development of computer software, mining, conversion of marble blocks or similar items into slabs, bottling of gas into cylinders, printing of books or production of cinematograph films, and any other business notified for this purpose. Generation of electricity was expressly included within manufacture or production.

Computation of total income

The concessional rate is linked with surrender of specified deductions and incentives. Under the current Section 201 framework, total income is computed without specified deductions under the Income-tax Act, 2025 and without set-off of losses or unabsorbed depreciation attributable to those deductions. Such restricted loss or depreciation is treated as having been given full effect and cannot be claimed again in a subsequent tax year.

This follows the same policy structure as Section 115BAB of the 1961 Act, which restricted specified deductions including certain accelerated depreciation, investment-linked deductions and specified Chapter VI-A deductions, while preserving the deductions expressly permitted by law.

Exercise of option and filing requirement

Under Section 115BAB, an eligible company opting for the concessional regime was required to furnish Form 10-ID electronically on or before the due date under Section 139(1) for the first applicable return. The Income Tax Department continues to provide the Form 10-ID service and guidance for earlier-year compliance.

Under Section 201(2) of the Income-tax Act, 2025, the option must be exercised in the prescribed manner on or before the due date specified for furnishing the first return. Once exercised, it applies to subsequent tax years and cannot ordinarily be withdrawn.

What happens if the conditions are breached?

If the company fails to fulfil the statutory eligibility conditions in a tax year, the concessional option becomes invalid for that year and subsequent years, and the other applicable provisions of the Income-tax law apply. The current Act also contains a route to Section 200 in specified cases where a Section 201 option becomes invalid because of particular violations.

Section 115BAB of the 1961 Act and Section 201 of the 2025 Act

Official references

For authoritative current text and compliance guidance, use the official Income Tax Department resources linked in the sidebar. Tax provisions may depend on the relevant tax year, amendments, rules and facts of the company.