115BAA 22% (no MAT). 115BAB 15% new manufacturing. 25% turnover ≤ ₹400cr. 30% others. Foreign co 40%. DDT abolished 2020 — dividend taxable at slab in shareholder hand.
PVT LTD CO TAX RATES (FY 2026-27): (1) SECTION 115BAA (new manufacturing): 22% (+ surcharge 10% + cess 4%) = 25.17% effective. (2) DOMESTIC COMPANY turnover ≤ ₹400cr: 25% (+ surcharge + cess) = ~26%. (3) DOMESTIC COMPANY turnover > ₹400cr: 30% (+ surcharge + cess) = ~31%. (4) NEW MANUFACTURING (incorporated post-Oct 2019): 15% (Section 115BAB) — lowest. (5) FOREIGN COMPANY: 40% + surcharge + cess. STRATEGIC: choose optimal regime annually. New manufacturing benefits from 15% rate.
SECTION 115BAA (introduced 2019): (1) 22% base + 10% surcharge + 4% cess = 25.17% effective. (2) AVAILABLE to all domestic companies (regardless turnover). (3) FOREGO: most deductions (additional depreciation, Section 10AA SEZ benefit, 80-IA, etc.). (4) MAT (Minimum Alternative Tax) NOT APPLICABLE. (5) ONCE OPTED: cannot reverse. SIMPLE + lower rate trade-off. STRATEGIC: companies WITHOUT significant deduction benefits prefer 115BAA. Lower compliance + lower tax.
MAT (Section 115JB) = MINIMUM 15% tax on BOOK PROFITS (regardless of tax-saving deductions). RATE: 15% + surcharge + cess = ~17%. APPLIES TO: (1) Domestic companies with significant deductions (Section 10AA SEZ, 80-IB, 80-IC). (2) Book profit > taxable income (due to deductions). (3) NEW REGIME 115BAA: MAT NOT APPLICABLE. MAT CREDIT: (1) Carry-forward 15 years. (2) Use when normal tax > MAT. (3) Reduce future tax burden. STRATEGIC: SEZ companies + startups: model MAT impact. New 115BAA escapes MAT — major benefit.
MAJOR 2020 BUDGET CHANGE: DIVIDEND DISTRIBUTION TAX (DDT) ABOLISHED. (1) PRE-2020: Companies paid 15% DDT on dividend distribution. Dividend tax-free in shareholder's hand. (2) POST-2020: NO DDT. Dividend TAXABLE in SHAREHOLDER's hand at slab rate. (3) TDS 10% on dividend > ₹5K (Section 194). (4) IMPACT: HIGH-NET-WORTH shareholders pay MORE (30%+ slab vs 15% DDT). LOW-NET-WORTH benefit. STRATEGIC: dividend timing + tax planning critical. ESOP holders + business owners with companies: consider buyback vs dividend. BUYBACK TAX (Section 115QA): 20% — separate.
PVT LTD STRATEGY: (1) CHOOSE OPTIMAL REGIME: 115BAA (22%) vs 115BAB (15% new manufacturing) vs 25% (small turnover) vs 30%. (2) SECTION 80-IAC startup tax holiday: 3 of 10 years 100% deduction (DPIIT-registered). (3) RESEARCH + DEVELOPMENT: Section 35 weighted deduction available (old regime). (4) MAT vs 115BAA: model both for SEZ + startup companies. (5) BUYBACK 20% vs dividend slab: compare for HNW shareholders. (6) ESOP COMPENSATION: deductible expense + ESOP holder taxed separately. (7) FOREIGN COMPANY tax 40% — higher. STRUCTURE: India operating subsidiary vs branch. (8) TRANSFER PRICING for cross-border. (9) ENGAGE Big-4/specialized CA for ₹10cr+ revenue companies. CRITICAL: annual regime + deduction optimization.