Concessional Corporate Tax (Section 200, formerly 115BAA) vs Normal Rate: Which Should Your Company Choose?
Section 200 (old 115BAA) gives companies a 22% base rate, about 25.17% effective, but removes most deductions. Compare it with the 25% or 30% normal rate.
Short answer
Most profitable companies without major tax incentives should opt for section 200 of the Income-tax Act 2025 (formerly section 115BAA): a 22% base rate, about 25.17% effective, and freedom from minimum alternate tax. Stay with the normal rate if you claim a startup tax holiday, SEZ or other deductions, or have large unabsorbed incentive losses. The option is irreversible.
- Section 200 base rate
- 22%
- Effective rate with surcharge and cess
- About 25.17%
- Normal rate
- 25% (turnover up to ₹400 crore in base year) or 30%
- MAT
- Not applicable under section 200
- Option deadline
- By the return due date of the first year opted
- Withdrawal
- Not allowed once exercised
What does the concessional regime offer?
Section 200 lets a domestic company pay tax at 22% on total income, plus a flat 10% surcharge and 4% cess, giving an effective rate of about 25.17% at any income level. In return, the company gives up specified deductions and exemptions, including the SEZ unit deduction, additional depreciation and most deductions under the chapter that was Chapter VI-A of the 1961 Act, with limited exceptions.
Companies opting in are outside the minimum alternate tax regime, and any MAT credit carried forward cannot be used. Section 201 (formerly section 115BAB) offered 15% to new manufacturing companies, but only those that began manufacturing by 31 March 2024, so it is closed to new companies.
Side-by-side comparison
The table compares the concessional option with the normal regime for a domestic company. Effective rates include surcharge and the 4% health and education cess, and assume no special-rate income.
| Factor | Section 200 (concessional) | Normal rate |
|---|---|---|
| Base rate | 22% | 25% or 30% |
| Surcharge | Flat 10% | 7% above ₹1 crore, 12% above ₹10 crore |
| Effective rate | About 25.17% at all income levels | About 26% to 34.9%, depending on rate and income |
| Minimum alternate tax | Not applicable | Applicable on book profits |
| MAT credit | Lapses | Can be set off |
| Startup tax holiday | Not available | Available if eligible |
| SEZ and additional depreciation | Not available | Available |
| Brought-forward incentive losses | Cannot be set off | Can be set off |
| Reversibility | Cannot be withdrawn | Company can opt into section 200 later |
Who benefits from staying on the normal rate?
A DPIIT-recognised startup that holds an inter-ministerial board certificate for the startup tax holiday, now under section 140 of the Income-tax Act 2025, can claim a full deduction of profits for three consecutive years out of its first ten. That deduction is not available under section 200, so such startups usually stay on the normal rate during the holiday years and opt in afterwards.
Companies with SEZ units, large additional depreciation claims or significant unabsorbed losses linked to those incentives should also model both regimes. A company with turnover up to ₹400 crore in the reference year pays a 25% base rate under the normal regime, so the saving from section 200 is smaller for it than for a company paying 30%.
How do you opt in?
The option is exercised in the prescribed form on or before the due date for filing the return of income for the first tax year it is to apply. Once exercised it applies to all later years and cannot be withdrawn. If the company fails a condition in any year, the option becomes invalid for that year and all later years, so check eligibility every year before filing.
Which should you choose?
Model both regimes for at least the next three to five years, because the choice is permanent once made. These rules capture the outcomes most companies reach after doing the numbers.
- Profitable company with few incentives: section 200.
- Startup in its tax-holiday window: normal rate now, section 200 after the holiday.
- Company with large MAT credit: compare; the credit lapses on opting in.
- Turnover above ₹400 crore paying 30% normally: section 200 almost always saves tax.
- SEZ unit still claiming deduction: normal rate until the deduction period ends.
Related services
Sources
- Section 200, Income-tax Act 2025: tax on income of certain domestic companies (EZTax)
- DPIIT revised startup definition, G.S.R. 108(E) (Taxmann)
Written by the Refogo Editorial Team from the official sources above and checked on 2026-10-31. Laws, rates and due dates change, and authorities often extend deadlines, so confirm your own case with a qualified professional. This is general information, not legal or tax advice. Read our editorial policy or report an error to support@refogo.com.
Common questions
What is the effective tax rate under section 200?
22% plus 10% surcharge plus 4% cess, which works out to about 25.17% regardless of income level.
Is section 115BAA still available?
Yes, under the Income-tax Act 2025 the same concessional regime continues as section 200 from tax year 2026-27 onwards.
Can a new manufacturing company still get 15% tax?
No. The 15% regime, now section 201, was available only to companies that started manufacturing by 31 March 2024. New companies can use section 200 instead.
Can a company switch back to the normal rate?
No. Once the section 200 option is exercised it cannot be withdrawn, unless it becomes invalid because conditions are breached.