Sub-section (1) offers a domestic company an optional rate of income-tax of 22% for a tax year, overriding the rest of the Act but subject to Parts A, B, E and this Part of the Chapter other than sections 199 and 201. The price is in three clauses: total income computed without any deduction under section 45(2) or 47(1)(b), under Chapter VIII other than section 146 or 148, or under the sections listed in section 205(1)(a) to (g); without set off of loss or depreciation carried forward from an earlier year if attributable to any of those deductions; and without set off of any loss or unabsorbed depreciation deemed so under section 116 if similarly attributable.
Sub-section (2) makes the option collapse on failure: where the company fails to satisfy the requirements in any tax year, the option becomes invalid for that year and subsequent years, and the Act applies as if it had never been exercised for that year and after. Sub-section (3) deems the loss and depreciation referred to in sub-section (1)(b) and (c) to have been given full effect to, with no further deduction in any subsequent year. Sub-section (4) preserves the section 147 deduction, on that section's conditions, for a person with a Unit in the International Financial Services Centre that has exercised the option.
Sub-section (5) makes the section inapplicable unless the option is exercised in such manner as may be prescribed on or before the due date specified under section 263(1), and provides that it then applies to subsequent tax years. Sub-section (6) forbids withdrawal once exercised, for the same or any other tax year. Sub-section (7) lets a domestic company whose option under section 201 has been rendered invalid by violation of section 205(2)(b), (c) or (d) exercise the option under this section.
Why it is there
The section trades a lower flat rate for the surrender of the incentive regime: a company taking 22% gives up the Chapter VIII deductions, the section 45(2) and 47(1)(b) deductions and those listed through section 205(1), together with the carried-forward losses and depreciation they generated. The one-way character of the option — irrevocable, invalid for all later years on any failure, with the surrendered losses permanently extinguished — is what stops a company moving between regimes according to which is cheaper in a given year.
Who it applies to
A domestic company exercising the option for a tax year
A domestic company having a Unit in the International Financial Services Centre that has exercised the option
A domestic company whose option under section 201 has been rendered invalid for violation of section 205(2)(b), (c) or (d)
The Assessing Officer testing whether the requirements of sub-section (1) have been satisfied in a year
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Rate of income-tax under the option
22%
At the option of a person being a domestic company, on total income computed as required by sub-section (1)(a), (b) and (c); subject to Parts A, B, E and this Part of the Chapter other than sections 199 and 201
Sub-section (1)
Last date for exercising the option
On or before the due date specified under section 263(1) for furnishing the return of income
Exercised in such manner as may be prescribed; the section does not apply at all unless this is done
Sub-section (5)
What this means in practice
The 22% does not arrive with the company's status; it arrives only if the option is exercised in the prescribed manner on or before the section 263(1) due date, and sub-section (5) makes the whole section inapplicable otherwise. What is surrendered is wider than the deductions: sub-section (1)(b) and (c) block set off of brought forward loss and depreciation attributable to them, and sub-section (3) treats them as having been given full effect to, so they are gone for good and do not revive if the option later becomes invalid. The failure consequence in sub-section (2) runs forward as well, while sub-section (6) blocks any voluntary exit — the company can lose the regime but cannot leave it. Sub-section (7) is a landing place, not a general escape: it is open only where the section 201 option failed for a violation of section 205(2)(b), (c) or (d).
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A domestic company with total income of Rs. 10 crore before deductions exercises the option in the prescribed manner before its section 263(1) due date. Its Chapter VIII deduction of Rs. 1.5 crore, which is not under section 146 or 148, is not allowed, and a brought forward loss of Rs. 2 crore attributable to those deductions cannot be set off, so tax is charged at 22% on Rs. 10 crore, or Rs. 2.2 crore. Under sub-section (3) the Rs. 2 crore of loss is deemed to have been given full effect to and cannot be claimed in any later year, and under sub-section (6) the company cannot withdraw the option in a later year in which the ordinary regime would have suited it better.
Where you meet this section
In the option exercised in the prescribed manner on or before the section 263(1) due date, and in the return and computation for every subsequent year, since the option carries forward automatically; and in an assessment order holding that the requirements of sub-section (1) were not satisfied, so that the option is invalid for that year and thereafter.
The words themselves
the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a domestic company
Section 200(1), Income-tax Act, 2025.
the option shall become invalid in respect of the said tax year and subsequent years
Section 200(2), Income-tax Act, 2025.
it shall not be subsequently withdrawn for the same or any other tax year
Section 200(6), Income-tax Act, 2025.
What people get wrong
Treating 22% as available on the strength of being a domestic company. Sub-section (5) makes the section inapplicable unless the option is exercised in the prescribed manner on or before the section 263(1) due date.
Assuming the surrendered losses come back if the option fails. Sub-section (3) deems them to have been given full effect to, with no further deduction in any subsequent year.
Reading a failure as affecting only the year of failure. Sub-section (2) makes the option invalid for that year and for subsequent years.
Assuming all Chapter VIII deductions are lost. Sub-section (1)(a)(ii) preserves sections 146 and 148, and sub-section (4) preserves the section 147 deduction for an International Financial Services Centre Unit.
Thinking the company can revert to the ordinary regime when it suits. Sub-section (6) forbids withdrawal for the same or any other tax year.
Using sub-section (7) as a general fallback from section 201. It applies only where that option was rendered invalid due to violation of section 205(2)(b), (c) or (d).
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
115BAA - Tax on income of certain domestic companies
Rules of the Income-tax Rules, 2026 that work section 200. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 136 — Exercise or withdrawal of option for new tax regime — on reading the rule
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 17/2024 — Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form No. 10-IC or Form No. 10-ID for Assessm 2024-11-18
Circular No. 6/2022 — Condonation of delay under section 119(2)(b) of the Income-tax Act, 1961 in filing of Form 10-IC for Assessment Year 2020-21 2022-03-17
Circular No. 29/2019 — Clarification in respect of option exercised under section 115BBA of the income tax act 1961 inserted through the recent ordinance 2019-10-02
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 200. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
Sarla Holdings P Ltd v PCITSupreme CourtHelps departmenttagged s.115BAA I did not tick s.115BAA in the return and filed Form 10-ic late. Can I still get the concessional rate?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.