My client company has a large MAT credit and wants the 22 per cent rate under s.115BAA. Does the credit survive the switch?
No. The Board has clarified that because s.115JB itself ceases to apply to a domestic company that exercises the s.115BAA option, 'the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option'. The same circular carries the answer to the problem: since there is no time limit for exercising the option, a company holding MAT credit may exercise it after utilising the credit against regular tax under the pre-Ordinance regime.
Decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Tax Policy and Legislation Division, Department of Revenue, Ministry of Finance) on 2019-10-02, reported as Circular No. 29/2019 dated 2 October 2019. It bears on section 115BAA, section 115BAA(2), section 115JAA, section 115JAA(8), section 115JB, section 32(1)(iia) of the Income Tax Act 1961, in Deductions & Disallowances and How Tax Law Is Read matters.
This is where a Chartered Accountant can lose a client. A company sitting on a MAT credit of several crores that is advised into s.115BAA forfeits the whole of it, and the forfeiture is silent — nothing in s.115BAA itself mentions MAT credit. The bar lives in s.115JAA(8), inserted by the Taxation Laws (Amendment) Act 2019 with effect from 1 April 2020: the provisions of s.115JAA do not apply to a person who has exercised the option under s.115BAA. The circular's own logic is that MAT under s.115JB is switched off for such a company, so no credit can be set off against a liability that does not arise. Two things follow that are worth more than the rule itself. First, the timing point at para 5.2.1 — the option has no deadline in the sense of a terminal year, so the arithmetic exercise is to model the credit run-off against the rate saving and pick the year of entry, not to opt in reflexively in the first year. Second, the parallel rule at para 5.1.1 for brought-forward loss attributable to additional depreciation under s.32(1)(iia), which is forfeited on the same terms, with the same timing answer at para 5.1.2. Note the limits of this document: it is a Board circular. It binds the Department but not the assessee or the courts, and it is a clarification of a statutory scheme rather than the source of the rule.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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The Taxation Laws (Amendment) Ordinance, 2019 was promulgated on 20 September 2019 and inserted s.115BAA into the Income-tax Act with effect from 1 April 2020, allowing a domestic company at its option to pay tax at 22 per cent for any previous year relevant to an assessment year beginning on or after 1 April 2020, subject to conditions including that total income be computed without claiming specified deductions or exemptions; the option was to be exercised before the due date for furnishing the return and, once exercised, could not be withdrawn and applied to all subsequent assessment years (paras 1 and 2). The Ordinance also amended s.115JB so that MAT does not apply to a person who has exercised the option under s.115BAA (para 3). Representations were received seeking clarification on two consequences: whether brought-forward loss on account of additional depreciation could be set off, and whether brought-forward MAT credit remained available (para 4).
Two clarifications. On additional depreciation: because clause (i) of s.115BAA(2) requires total income to be computed without any deduction under s.32(1)(iia) and clause (ii) bars set off of any carried-forward loss attributable to it, a company exercising the option cannot set off brought-forward loss on account of additional depreciation for the year of the option or any subsequent year (para 5.1.1); but as there is no time line within which the option may be exercised, such a company may, if it so desires, exercise the option after setting off those accumulated losses (para 5.1.2). On MAT credit: as s.115JB itself does not apply to a company exercising the option, the tax credit of MAT paid shall not be available consequent to exercising the option (para 5.2); and again, as there is no time line, a company holding MAT credit may exercise the option after utilising the credit against regular tax payable under the regime existing before the Ordinance (para 5.2.1).
The Board's route on MAT credit is a single step and it is worth noting how narrow it is: the credit falls away not because s.115BAA says so but because s.115JB — the charging provision that generates the credit — is switched off for a company that has opted in, so there is no MAT liability against which a credit could operate. On additional depreciation the route is textual: the two clauses of s.115BAA(2) between them remove both the current deduction under s.32(1)(iia) and the set-off of any brought-forward loss attributable to it. On both issues the Board then draws the same practical inference from the absence of a terminal date for exercising the option — the company controls the year of entry, and can therefore run off the credit or the loss first.
it is hereby clarified that the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option.
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Handle my notice → Ask a CA on WhatsAppNo. The Board has clarified that because s.115JB itself ceases to apply to a domestic company that exercises the s.115BAA option, 'the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option'. The same circular carries the answer to the problem: since there is no time limit for exercising the option, a company holding MAT credit may exercise it after utilising the credit against regular tax under the pre-Ordinance regime. This was decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Tax Policy and Legislation Division, Department of Revenue, Ministry of Finance) and bears on section 115BAA, section 115BAA(2), section 115JAA, section 115JAA(8), section 115JB, section 32(1)(iia) of the Income Tax Act 1961. It is reported as Circular No. 29/2019 dated 2 October 2019. This is where a Chartered Accountant can lose a client. A company sitting on a MAT credit of several crores that is advised into s.115BAA forfeits the whole of it, and the forfeiture is silent — nothing in s.115BAA itself mentions MAT credit. The bar lives in s.115JAA(8), inserted by the Taxation Laws (Amendment) Act 2019 with effect from 1 April 2020: the provisions of s.115JAA do not apply to a person who has exercised the option under s.115BAA. The circular's own logic is that MAT under s.115JB is switched off for such a company, so no credit can be set off against a liability that does not arise. Two things follow that are worth more than the rule itself. First, the timing point at para 5.2.1 — the option has no deadline in the sense of a terminal year, so the arithmetic exercise is to model the credit run-off against the rate saving and pick the year of entry, not to opt in reflexively in the first year. Second, the parallel rule at para 5.1.1 for brought-forward loss attributable to additional depreciation under s.32(1)(iia), which is forfeited on the same terms, with the same timing answer at para 5.1.2. Note the limits of this document: it is a Board circular. It binds the Department but not the assessee or the courts, and it is a clarification of a statutory scheme rather than the source of the rule. If it applies to you, the first step is this: Before recommending s.115BAA, take the MAT credit balance and the unabsorbed additional-depreciation loss out of the last accepted return and build a year-by-year model: tax at 22 per cent with no credit, against tax at the normal rate with the credit and the loss run off. The circular expressly contemplates opting in only after the credit has been utilised.
The Taxation Laws (Amendment) Ordinance, 2019 was promulgated on 20 September 2019 and inserted s.115BAA into the Income-tax Act with effect from 1 April 2020, allowing a domestic company at its option to pay tax at 22 per cent for any previous year relevant to an assessment year beginning on or after 1 April 2020, subject to conditions including that total income be computed without claiming specified deductions or exemptions; the option was to be exercised before the due date for furnishing the return and, once exercised, could not be withdrawn and applied to all subsequent assessment years (paras 1 and 2). The Ordinance also amended s.115JB so that MAT does not apply to a person who has exercised the option under s.115BAA (para 3). Representations were received seeking clarification on two consequences: whether brought-forward loss on account of additional depreciation could be set off, and whether brought-forward MAT credit remained available (para 4). The matter was decided on 2019-10-02 by the CBDT Circulars & Instructions (Central Board of Direct Taxes, Tax Policy and Legislation Division, Department of Revenue, Ministry of Finance). On those facts the CBDT Circulars & Instructions held as follows. Two clarifications. On additional depreciation: because clause (i) of s.115BAA(2) requires total income to be computed without any deduction under s.32(1)(iia) and clause (ii) bars set off of any carried-forward loss attributable to it, a company exercising the option cannot set off brought-forward loss on account of additional depreciation for the year of the option or any subsequent year (para 5.1.1); but as there is no time line within which the option may be exercised, such a company may, if it so desires, exercise the option after setting off those accumulated losses (para 5.1.2). On MAT credit: as s.115JB itself does not apply to a company exercising the option, the tax credit of MAT paid shall not be available consequent to exercising the option (para 5.2); and again, as there is no time line, a company holding MAT credit may exercise the option after utilising the credit against regular tax payable under the regime existing before the Ordinance (para 5.2.1).
The Board's route on MAT credit is a single step and it is worth noting how narrow it is: the credit falls away not because s.115BAA says so but because s.115JB — the charging provision that generates the credit — is switched off for a company that has opted in, so there is no MAT liability against which a credit could operate. On additional depreciation the route is textual: the two clauses of s.115BAA(2) between them remove both the current deduction under s.32(1)(iia) and the set-off of any brought-forward loss attributable to it. On both issues the Board then draws the same practical inference from the absence of a terminal date for exercising the option — the company controls the year of entry, and can therefore run off the credit or the loss first. In the words reproduced by the source cited on this page: "it is hereby clarified that the tax credit of MAT paid by the domestic company exercising option under section 115BAA of the Act shall not be available consequent to exercising of such option."
It was decided by the CBDT Circulars & Instructions on 2019-10-02 and is reported as Circular No. 29/2019 dated 2 October 2019. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 115BAA, section 115BAA(2), section 115JAA, section 115JAA(8), section 115JB, section 32(1)(iia), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. Two clarifications. On additional depreciation: because clause (i) of s.115BAA(2) requires total income to be computed without any deduction under s.32(1)(iia) and clause (ii) bars set off of any carried-forward loss attributable to it, a company exercising the option cannot set off brought-forward loss on account of additional depreciation for the year of the option or any subsequent year (para 5.1.1); but as there is no time line within which the option may be exercised, such a company may, if it so desires, exercise the option after setting off those accumulated losses (para 5.1.2). On MAT credit: as s.115JB itself does not apply to a company exercising the option, the tax credit of MAT paid shall not be available consequent to exercising the option (para 5.2); and again, as there is no time line, a company holding MAT credit may exercise the option after utilising the credit against regular tax payable under the regime existing before the Ordinance (para 5.2.1). It arises in Deductions & Disallowances and How Tax Law Is Read matters, on section 115BAA, section 115BAA(2), section 115JAA, section 115JAA(8), section 115JB, section 32(1)(iia) of the Income Tax Act 1961, and was decided by Central Board of Direct Taxes, Tax Policy and Legislation Division, Department of Revenue, Ministry of Finance. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Remember that the credit is not deferred, it is gone. There is no revival if the company later ceases to be in the s.115BAA regime, because the option once exercised cannot be withdrawn. Do not look for the rule in s.115BAA. Cite s.115JAA(8) together with para 5.2 of this circular; a s.143(1) adjustment denying the credit will be founded on the sub-section, not the circular. Do the same check for s.115BAB (new manufacturing companies) — s.115JB does not apply there either — and, for a non-corporate assessee or a co-operative society, do the equivalent check under s.115JD(7), which bars AMT credit where the option under s.115BAC(5), s.115BAD(5) or s.115BAE(5) has been exercised or where tax is computed under s.115BAC(1A). Record the advice in writing. The client who forfeits a credit on your recommendation will want to know he was told.
Still good law. No later circular withdraws, modifies or supersedes Circular No. 29/2019, and it is being applied. In Income Tax Officer, Ward-27(1), New Delhi v. Western Developers Private Limited (ITAT Delhi Bench 'A', 6 May 2026) the appellate authority's reasoning, set out at paragraph 5.4.3 of the order under appeal and reproduced in the Tribunal's order, rests on the circular — 'The Central Board of Direct Taxes (CBDT) further clarified this in Circular No. 29/2019, stating that the MAT credit would not be available after exercising the option under Section 115BAA' — and the Tribunal adopted it at paragraph 3, holding that the appellate authority 'has interpreted the law correctly' and declining to interfere. That is a decision after the repeal date applying the circular, so it is no longer a Board view standing alone without judicial support. A second Tribunal order, ACIT v. Lahari Holiday Homes (P) Ltd (ITAT Hyderabad, 2025), also appears to apply it but has not been examined and is not relied on here. Two dating points. Section 115BAA and s.115JAA were provisions of the Income-tax Act, 1961, repealed on 1 April 2026 by s.536 of the Income-tax Act, 2025, so the circular now speaks only to the old Act; and s.536(2)(j) keeps it valid so far as it does not conflict with the new Act. One point of substance goes with it: the bar on MAT credit does not live in the circular, or in s.115BAA, but in s.115JAA(8), inserted by the Taxation Laws (Amendment) Act 2019 with effect from 1 April 2020, and an adjustment under s.143(1) denying the credit will be founded on that sub-section. The circular explains the bar and supplies the timing answer; it is not the source of the bar. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
No official copy of this circular is available here. The text set out is taken from a published reproduction, with the header corroborated against a second reproduction, so the wording should be checked against the Board's own copy before it is quoted in a proceeding. Three artefacts in that transcription should be treated as scanning damage and not as the circular's own text. The file number appears as '142120/2019-TPL' in one reproduction and as '142f2012019-TPL' in the other, both plainly renderings of F. No. 142/20/2019-TPL. The three clauses of paragraph 2 are lettered (d), (e) and (f) where the original will read (a), (b) and (c). And the copy carries no signature block and no concluding paragraph, so nothing can be said about what, if anything, follows paragraph 5.2.1. Note also that the circular is mis-titled in some indexes as concerning 'section 115BBA'; the subject line inside the document reads 115BAA. The passage quoted in this entry is paragraph 5.2 as it appears in the copy used. Three things about the substance. First, the circular is not the source of the rule. The bar on carrying MAT credit into the s.115BAA regime lives in s.115JAA(8), inserted by the Taxation Laws (Amendment) Act 2019 with effect from 1 April 2020, under which the provisions of s.115JAA do not apply to a person who has exercised the option; the circular explains why, by pointing out that s.115JB itself is switched off so there is no liability against which a credit could work. Argue the section, and use the circular to show that the Department's own position is the same. Second, a Board circular binds the Department but not the assessee and not the courts, and this one is a clarification of a statutory scheme rather than an independent source of obligation; a company that wants to contend that accumulated credit survives is not shut out by the circular, though it must meet s.115JAA(8). Third, the timing answer at paragraphs 5.1.2 and 5.2.1 is the part of the document that earns its keep: because there is no terminal year for exercising the option, the company chooses the year of entry, and the right exercise is to model the run-off of MAT credit and of brought-forward loss attributable to additional depreciation under s.32(1)(iia) against the saving from the twenty-two per cent rate. The circular says nothing about credit already utilised before the option, nothing about a company that opts in and then finds the conditions in s.115BAA(2) broken, and nothing about s.115BAB. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Two clarifications. On additional depreciation: because clause (i) of s.115BAA(2) requires total income to be computed without any deduction under s.32(1)(iia) and clause (ii) bars set off of any carried-forward loss attributable to it, a company exercising the option cannot set off brought-forward loss on account of additional depreciation for the year of the option or any subsequent year (para 5.1.1); but as there is no time line within which the option may be exercised, such a company may, if it so desires, exercise the option after setting off those accumulated losses (para 5.1.2). On MAT credit: as s.115JB itself does not apply to a company exercising the option, the tax credit of MAT paid shall not be available consequent to exercising the option (para 5.2); and again, as there is no time line, a company holding MAT credit may exercise the option after utilising the credit against regular tax payable under the regime existing before the Ordinance (para 5.2.1).
TaxSphere, “CBDT Circular No. 29/2019 — MAT credit on opting into s.115BAA”, https://taxnotice.vittsphere.com/caselaw/case/cbdt-circular-29-2019-mat-credit-not-available-on-115baa-option/ (validity last checked 2026-09-07)
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My staff filed Form 10-IC by mistake, then I filed the return under the normal provisions and set off my brought-forward MAT credit. CPC has taxed me under s.115BAA and wiped the credit out. Section 115BAA says the option cannot be withdrawn. Am I stuck?
We filed the original return under MAT claiming MAT credit, then filed a revised return within the due date opting for s.115BAA. The Assessing Officer says that is a prohibited withdrawal of the option. Is it, and what happens to the MAT credit and our brought-forward losses?
CPC has processed our return under s.143(1), rejected the s.115BAA option because Form 10-IC was late, and raised a demand by computing book profit under s.115JB. Can it do both?
I did not tick s.115BAA in the return and filed Form 10-IC late. Can I still get the concessional rate?
