Extension of last date of manufacturing u/s 115BAB & exemption for eligible start-ups- Finance Bill 2022

In a move to support the manufacturing sector & start-ups, the Central Government has proposed major changes in the Income Tax Act through Finance Bill 2022 which you must be aware of:

Extension of the last date for commencement of manufacturing or production u/s 115BAB

Section 115BAB of the Income Tax Act provides for a concessional tax regime at the rate of 15% for the new domestic manufacturing companies. Sub-section (2) of section 115BAB provides that new domestic manufacturing companies incorporated on or after 01.10.2019 would be taxed at the concessional tax rate of 15% subject to the condition that such companies commence the manufacturing or production on or before 31^st March 2023.

However, the cumulative impact of the persistence of the Covid-19 pandemic has resulted in delays in setting up, registration, and commencement of production by new manufacturing companies. In order to provide relief to such companies, the Finance Bill 2022 has proposed to extend the date of commencement of manufacturing or production of an article or thing from 31^st March 2023 to 31^st March 2024.

Extension of date of incorporation for eligible start-ups for exemption

Similarly, section 80-IAC of the Income Tax Act provides for a deduction of 100% of the profits and gains derived from an eligible business by an eligible start-up for 3 consecutive assessment years out of 10 years, beginning from the year of incorporation, at the option of the assessee subject to the condition that:

• The total turnover of its business does not exceed Rs. 100 crores,
• It is holding a certificate of eligible business from the Inter-Ministerial Board of Certification, and
• It is incorporated on or after the 1^st day of April 2016 but before the 1^st day of April 2022.

It is proposed to grant an extension of one year for incorporation to promote such eligible start-ups. Thus, the afore-mentioned tax incentive can be availed by the eligible start-ups even if they are incorporated up to 31^st March 2023.