Form 10-IB is a new tax-related application that enables young startups and businesses to choose better tax rates for themselves. By enabling such options, the government is encouraging and promoting the startup culture in India so as to boost our economic growth.
The Central Board of Direct Taxes, better known as the CBDT, began issuing Form 10-IB to allow startups to choose a more economical tax rate. The current notification supplements Rule 21AD of the income tax laws, enabling an option under sub-section 115BA(4) of the Income Tax Act. However, the report states that the filing will consider requirements of sub-section (4) of subdivision 115BA of the Income Tax Act. Eligible private companies, for any preceding year starting on or after 1 April 2017, can apply via Form 10-IB. Are you looking for such tax breaks for your startup? If so, read on to learn more about Form 10-IB of the Income Tax Act.
Subdivision 115BA of the Income Tax Act
The finance ministry added Sections 115 BAA and BAB into the Income Tax Act, 1961, through the union budget 2020. They provide companies with several tax benefits, including a reduced tax rate for domestic companies. While all existing domestic companies can pay tax at a concessional rate of 22%, new companies established on or after 1 Oct 2019, and commencing operations before 31 March 2023 can pay tax at 15%. However, such reduced tax rates come with the surrender of several deductions and incentives. Such companies cannot claim any minimum alternate tax, whereas those that opt out of such reduced rates shall continue to enjoy benefits at a MAT of 15%.
These regulations help regulate the requirements of Section 111A and Section 112 and have rules regarding the income-tax owing of a person. It includes private company earnings for any preceding year related to the evaluation year. The rules will be applicable for periods that fall on or after 1 April 2017. Furthermore, they allow individuals who comply with provisions stated under sub-section (2) to calculate liabilities at the rate of 25%. To meet the requirements mentioned in subsection (1), companies must have continuous setup and registration. Additionally, the business must not have involvement in markets other than production or manufacturing.
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What Is Rule 21AD of Section 115BA?
These rules have to do with the right to employment under the terms of sub-section (4) of division 115BA by a person or a domestic firm. These rules are applicable for any previous year related to the assessment year commencing on or after 1 April 2017. Individuals can file proceedings related to such causes via Form No. 10-IB. Additionally, the benefits provided by Form 10-IB regarding subrule (1) shall occur electronically. This can be either via Digital signature or automatic confirmation code.
The rules from the principal director general of income tax or director-general of income tax designate the method for filing the form. It also specifies the data structure, rules, and practice of the production of automatic verification code. It refers to sub-rule (2) for matters regarding the confirmation of the person submitting the Form. Additionally, it will be accountable for maintaining the proper security, archival, and retrieval procedures.
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Benefits of Form 10-IB
Form 10-IB gives companies the choice to apply under the terms of sub-section (4) of division 115BA of the Income Tax Act: https://incometaxindia.gov.in/pages/acts/income-tax-act.aspx. Hence, it allows such relaxations for any former year relating to an assessment year commencing on or after 1 April 2017. Under Section 12A, the Income Tax Act, 1961, Form 10 serves as an appeal for the enrollment of a trust or company. Therefore, business owners can submit Form 10 online by using the e-filing website of the income tax department. The form contains information regarding the choice to apply under sub-section (4) of 115BA of the Income Tax Act. It must, therefore, contain the following company details;
- Name of the company
- Whether this is a domestic company or not
- PAN number
- Registered address
- Date of incorporation
- Nature of the business or activities of the company.
How to Fill Out Form No. 10-IB online?
- Step 1: Visit the income tax website and log in with your user ID and password
- Step 2: Select ‘Income Tax Forms’ from the e-file menu, then choose Form 10-IB from the dropdown
- Step 3: Enter essential details such as the company’s name, PAN number, date of birth, type of business, and any other required information
- Step 4: Review all the details carefully to avoid errors, then click ‘Preview and Submit’ to verify the entered information
- Step 5: The form should be digitally signed or verified using an electronic verification code
- Step 6: After submission, a confirmation email will be sent to the registered email address.
Mistakes to Avoid
- Errors in the PAN or company details
- Forgetting to include essential information such as the date of incorporation or nature of operations
- Not digitally verifying the form using the required methods
- Missing the filing deadline can result in penalties.
How Can Vakilsearch Assist You?
Form 10-IB is an important form that allows taxpayers to choose their tax rate and regime. By carefully considering their income, expenses, and deductions, taxpayers can choose the tax regime that suits them the best. Vakilsearch offers a comprehensive taxation package that includes everything from tax registrations to drafting and filing returns. We collect all the required information and documents to maintain your invoice record. Hence, at the end of the month, you can easily file your returns with guidance and assistance from our team of legal and taxation experts. Once you complete the online filing process, our expert affiliate will remind you about your due dates to prevent non-compliance. Make paying your liabilities and filing your tax returns hassle-free and smooth by partnering with us at Vakilsearch!
Frequently Asked Questions
Is Form 10-IB to be filed every year?
Form 10-IB does not need to be filed every year. It is required to be filed once, at the time of claiming a deduction under Section 80-IA of the Income Tax Act for a specified financial year. Subsequent filings are not necessary unless there are changes.
What is the rate for Form 10-IB?
Form 10-IB itself does not have a rate as it is a form used for reporting purposes. It is used to claim tax benefits under Section 80-IA, which provides deductions based on the eligible business activity and compliance with relevant conditions, not a specific rate.
How is Form No. 10-IB different from Form No. 10-B?
Form No. 10-IB is used to claim deductions under Section 80-IA for eligible businesses, while Form No. 10-B is used for claiming deductions under Section 80-IB
What is the purpose of the 10-IB Form?
Form 10-IB is used to claim tax deductions under Section 80-IA for businesses engaged in specified activities like infrastructure development. It verifies eligibility for deductions and compliance with conditions required to benefit from tax exemptions or reductions.
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