Concessional 22% corporate tax rate (old section 115BAA, now section 200)
Domestic companies can opt for 22% tax without most deductions under section 200 of the Income-tax Act 2025, formerly 115BAA. MAT does not apply.
Short answer
The concessional corporate tax option lets a domestic company pay income tax at 22%, plus 10% surcharge and 4% cess, an effective rate of about 25.17%, if it gives up most deductions and incentives. Introduced as section 115BAA of the 1961 Act, it is now section 200 of the Income-tax Act, 2025. Companies under it are outside MAT.
- Provision
- Section 200, Income-tax Act 2025 (formerly 115BAA)
- Base rate
- 22%
- Effective rate
- About 25.17% with surcharge and cess
- Withdrawal
- Not allowed once exercised
Conditions of the option
The company must compute total income without certain deductions and exemptions, including most tax holidays and incentive deductions, and without setting off brought-forward losses or depreciation linked to those deductions. If the conditions are not met in any year, the option lapses for that year and later years. The option must be exercised in the prescribed manner on or before the return due date, and once exercised, it applies for all later years and cannot be withdrawn.
Comparison with the regular regime
Under the regular regime, domestic companies pay 25% or 30% depending on turnover, plus surcharge and cess, but can claim deductions such as the startup tax holiday. They are also subject to MAT, which Budget 2026 cut to 14% and made a final tax. Under section 200, there is no MAT, but incentives are given up.
- Section 200: 22% base rate, no MAT, limited deductions
- Regular regime: higher base rate, deductions allowed, MAT applies
- Startup tax holiday (section 140) is not available with section 200
Why it matters for startups
A loss-making startup gains little from the option in early years, and a startup eligible for the three-year tax holiday may prefer the regular regime while the holiday lasts. Once the holiday ends or profits grow, section 200 is often attractive. Because the choice is irreversible, model taxes for several years before opting.
Related services
Sources
- EZTax: Section 200, Income-tax Act 2025 (22% option for domestic companies)
- EZTax: Income-tax Act 1961 vs 2025 section mapping
- Business Standard: Budget 2026 makes MAT a final tax
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
Can a startup opt for section 200 and also claim the section 140 holiday?
No. The concessional rate requires giving up incentive deductions such as the startup tax holiday.
Is MAT applicable to companies under section 200?
No. Companies that opt for the 22% rate are outside MAT.
Can an LLP opt for the 22% rate?
No. The option is available only to domestic companies. LLPs are taxed at the rate for firms.