Circular No. 29/2019 — Clarification in respect of option exercised under section 115BBA of the income tax act 19

What this is

Circular No. 29/2019 was issued by the Central Board of Direct Taxes on 2 October 2019. Its subject is Clarification in respect of option exercised under section 115BBA of the income tax act 1961 inserted through the recent ordinance.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Deals with the option under section 115BAA, inserted with effect from 1 April 2020 by the Taxation Laws (Amendment) Ordinance, 2019 promulgated on 20 September 2019. It restates the three limbs that matter in practice: a domestic company may opt 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 any deduction or exemption; the option must be exercised before the due date for furnishing the return of income; and once exercised it cannot be withdrawn and applies to all subsequent assessment years.

Why it was issued

The new section had just been brought in by Ordinance and clarity was sought on how the option under it works.

Who it reaches

Domestic companies weighing the 22 per cent regime
Companies carrying unabsorbed deductions or exemptions they would have to give up
Directors and auditors signing off on the year in which the option is first exercised

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.115BAA	s.200, s.205

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it. The reading also stopped short of the end of the document: what is below is the opening, not the whole of it.

F. No. 142f2012019·TPL Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Circular No 56/2019 New Delhi, 27th of October, 2019

Subject: Clarifications in respect of option exercised under Section 115BAA of the Income-Tax Act, 1961 inserted through The Taxation Laws (Amendment) Ordinance, 2019-KE.

The Taxation Laws (Amendment) Ordinance, 2019 (the Ordinance) has been promulgated by the President of India on September 20, 2019. The Ordinance, inter alia, inserted a new section 115BAA in the Income-Tax Act, 1961 (the Act) with effect from April 1, 2020.

2. Section 115BAA so inserted, inter alia, provides that,—

(d) A domestic company shall, in its option, pay tax at a lower rate of 22 per cent for any previous year relevant to the Assessment Year beginning on or after 1st April 2020, subject to certain conditions, including that the total income should be computed without claiming any deduction or exemption;

(e) the option is required to be exercised by the company before the due date of furnishing return of income; and

(f) the option, once exercised, cannot be subsequently withdrawn and shall apply to all subsequent assessment years.

What to watch

The option has to be exercised before the due date for furnishing the return, not merely by the time the return is actually filed.
It is irrevocable — once exercised it binds the company for every later assessment year as well.
The lower rate is bought by computing total income without any deduction or exemption, so the arithmetic has to be run both ways before opting.
The regime begins with the assessment year commencing on 1 April 2020; it does not reach earlier years.

Where you meet it

When the option is filed for a company before the return due date, and later when an assessment questions whether the option was validly and timely exercised for the first year it was claimed.

What it names

It mentions. Circular No. 56/2019

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

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 f 18 November 2024
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 202 17 March 2022

← Circular No. 30/2019 · Circular No. 28/2019 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.