Income Tax Act 2025: Section 200 for Tax Year 2026-27

Tax on income of certain domestic companies

[Section-200 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 200(1) of Income Tax Act 2025

200(1) Irrespective of anything contained in this Act but subject to the provisions of Parts A, B and this Part, other than sections 199 and 201, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a domestic company, in respect of the total income of such person computed in the following manner:––

• 200(1)(a) without any deduction under––
  • (i) sections 45(2)(c) and 47(1)(b); or
  • (ii) Chapter VIII other than the provisions of section 146; or
  • (iii) sections specified in section 205(1)(a) to (g);
• 200(1)(b) without set off of any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a);
• 200(1)(c) without set off of any loss or allowance for unabsorbed depreciation deemed so under section 116(1), if such loss or depreciation is attributable to any of the deductions referred to in clause (a).

Section 200(2) of Income Tax Act 2025

200(2) Where the person fails to satisfy the requirements contained in sub-section (1) in any tax year, the option shall become invalid in respect of the said tax year and subsequent years and other provisions of the Act shall apply, as if the option had not been exercised for such tax year and for subsequent years.

Section 200(3) of Income Tax Act 2025

200(3) The loss and depreciation referred to in sub-section (1)(b) and (c) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year.

Section 200(4) of Income Tax Act 2025

200(4) In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under sub-section (5), the requirements contained in sub-section (1) shall be modified to the extent that the deduction under the said section shall be available to such Unit subject to fulfilment of the conditions contained in that section.

Section 200(5) of Income Tax Act 2025

200(5) The provisions of this section shall not apply unless the option is exercised by the person in the such manner as prescribed on or before the due date specified under section 263(1) for furnishing the return of income and such option once exercised, shall apply to subsequent tax years.

Section 200(6) of Income Tax Act 2025

200(6) Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.

Section 200(7) of Income Tax Act 2025

200(7) In case of a person, being a domestic company, where the option exercised by it under section 201, has been rendered invalid due to violation of the conditions contained in section 205(2)(b) or (c) or (d), such person may exercise the option under this section.

FAQs on Section 200 of Income Tax Act 2025

What is the tax rate applicable under Section 200(1) for domestic companies?
A domestic company can opt to pay income-tax at the rate of 22% under Section 200(1), subject to specified conditions.

What are the conditions to avail the 22% tax rate under Section 200(1)?
The income must be computed without claiming deductions under specified sections, without setting off carried forward losses or depreciation attributable to those deductions, and without set off of deemed unabsorbed depreciation.

Which deductions are not allowed under Section 200(1)(a)?
Deductions under sections 45(2)(c), 47(1)(b), Chapter VIII (except section 146), and sections specified in 205(1)(a) to (g) are disallowed.

Can carried forward losses or depreciation be set off under this section?
No, if they relate to the deductions specified in Section 200(1)(a), such losses or depreciation cannot be set off.

What happens to the unabsorbed losses and depreciation once the option under Section 200 is exercised?
They are deemed to have been fully set off and cannot be claimed in subsequent tax years as per Section 200(3).

Can the option under Section 200 be exercised after the due date for filing return?
No, the option must be exercised on or before the due date specified under Section 263(1) for furnishing the return.

Once exercised, can the option under Section 200 be withdrawn later?
No, once exercised, the option cannot be withdrawn for the same or any other tax year as per Section 200(6).

What if the domestic company fails to meet the conditions in a future year?
The option becomes invalid for that year and all subsequent years, and the company is taxed as if the option was never exercised (Section 200(2)).

Can a company that failed the conditions under Section 201 later opt for Section 200?
Yes, if the option under Section 201 becomes invalid due to violations under Section 205(2)(b), (c), or (d), the company may opt for Section 200 (Section 200(7)).

Is there any relaxation for units in International Financial Services Centres?
Yes, such units can still claim deductions specified under Section 200(4), subject to conditions of that section, even when opting under Section 200.