/ Corporate Regime Decision Tree · Updated 2026-10-23

Which Corporate Tax Regime 115BAA vs 115BAB vs Standard, 22% vs 15% vs 25% choice framework.

Indian company choosing corporate tax regime: Section 115BAA (22% + 25.17% effective) vs 115BAB (15% + 17.16% effective, new manufacturing only) vs Standard (25% + 29% effective / 30% + 34.94%). Each has distinct eligibility + forfeited deductions + MAT applicability. Choice is irrevocable once Form 10-IC / 10-ID filed. Here's the BQP decision-tree framework for optimal regime.

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Written by CA Durgesh Chavda

Chartered Accountant (ICAI) · Founder, Bharat Quantum Prospera · US incorporation, India-US DTAA, FEMA ODI, NRI taxation, cross-border structuring · LinkedIn

/ The 4-question decision tree

Pick based on specifics.

Q1: Is company new manufacturing (post Oct 2019 incorporation + commencing production)?

Yes + meets 115BAB conditions → Section 115BAB 15% rate.
No → continue to Q2.

Q2: Do you have significant SEZ Section 10AA / scientific research Section 35 / Chapter VI-A deductions?

Yes + deductions substantial → Standard regime 25% / 30% to preserve deductions.
No → continue to Q3.

Q3: Do you have large carry-forward losses attributable to forfeited deductions?

Yes + losses would be lost → Standard regime to preserve losses.
No → continue to Q4.

Q4: Any specific sector deductions (shipping Section 115VX, hotel Section 80ID, specific business Section 35AD)?

Yes + specific sector deductions critical → Standard regime.
No → Section 115BAA 22% rate (default best for most mature profitable companies).

/ Section 115BAB specific eligibility

The strict conditions.

Company incorporated on or after 1 October 2019.
Commences manufacturing / production of article / thing on or before 31 March 2024 (extended for specific sectors - verify current state).
Not formed by splitting up / reconstruction of existing business.
Does not use plant and machinery previously used in India (second-hand > 20% threshold disqualifies).
Does not use building previously used as hotel / convention centre.
Engaged in manufacturing or production. NOT in: electricity generation (specific exception), mining, book printing, re-labelling, software (controversial post 2022 clarifications - CBDT view: software NOT manufacturing).
Related-party transactions at arm's-length pricing.

/ 115BAA vs Standard: the usual question

Where most Indian companies choose.

Mature profitable Indian company without substantial SEZ / scientific research / specific sector deductions: Section 115BAA 22% effective 25.17% wins vs Standard 25% + 15% MAT = ~27% effective.
Decision drivers:
— No MAT under 115BAA = ~2-3% tax saving.
— 22% vs 25% rate = 3% saving.
— Trade-off: forfeited Chapter VI-A (except 80JJAA new employment + 80M inter-corporate dividend) + SEZ 10AA + scientific research + specific other.
For most companies without these deductions: 115BAA wins by 2-5% effective tax rate.

/ Decision modelling workflow

What BQP does.

Current year expected profit + 5-year projection.
Current deduction profile: Section 10AA SEZ, Section 35 scientific research, Chapter VI-A (80JJAA + 80M + others), specific sector deductions.
Carry-forward losses attributable to specific deductions.
MAT impact under Standard regime: book profit × 15% vs Standard tax.
Model: Standard tax + MAT + MAT credit vs 115BAA 22% effective vs 115BAB 15% (if eligible).
5-year projection decision + irrevocability check.
Form 10-IC (115BAA) or Form 10-ID (115BAB) filing with ITR of first-year opt-in.

Last updated: 2026-10-23.

/ Ready when you are

Choosing between 115BAA vs 115BAB vs Standard?

4-question decision tree + 5-year modelling + Form 10-IC / 10-ID + irrevocability. BQP corporate tax regime specialist.

Get a firm quote → WhatsApp Durgesh

FAQ

Common questions, answered.

Should every Indian company opt into Section 115BAA?

No. Most mature profitable companies without substantial SEZ 10AA / scientific research / specific sector deductions: 115BAA 22% effective 25.17% wins. But companies with large SEZ 10AA + scientific research + carry-forward losses attributable to these: Standard regime may be better. Specific modelling required.

What's the typical savings from Section 115BAA opt-in?

2-5% effective tax rate for most companies. Example: INR 10 crore net profit. Standard regime 25% + possible MAT = INR 2.5 crore. 115BAA 22% effective 25.17% = INR 2.5 crore. Appears same but no MAT under 115BAA = better cash flow. For specific profiles 115BAA saves 2-5% effective.

Is Section 115BAB available to software companies?

No per CBDT view (post 2022 clarifications). Software development is treated as SERVICES not MANUFACTURING - 115BAB specifically requires manufacturing/production of article/thing. Pure SaaS / software: Section 115BAA 22% applicable (not 115BAB 15%). Specific hardware-adjacent sub-activities may be arguable.

Can new manufacturing company switch 115BAB to 115BAA later?

No - both are irrevocable one-time elections. Choose carefully. If 115BAB subsequently fails conditions (e.g., P&M used elsewhere): falls back to STANDARD regime (not 115BAA).

How does Section 115BAA interact with PLI scheme?

Both can coexist. 115BAA (Income Tax Act) is tax rate; PLI (Government scheme) is cash incentive on incremental sales. Both apply simultaneously. For new manufacturing: 115BAB (15% rate) + PLI (4-18% cash incentive) + state incentives + customs = among most generous incentive stacks globally.

Does BQP handle regime decision + Form 10-IC / 10-ID filing?

Yes - standard engagement. 5-year tax modelling + regime decision + forfeited deduction analysis + Form 10-IC (115BAA) / Form 10-ID (115BAB) filing with ITR + ongoing compliance monitoring + Form 29B MAT compliance for Standard regime. Standard engagement for Indian companies at corporate tax decision point. WhatsApp +91 78018 87130.