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Domestic Indian companies can elect a 22% corporate tax rate under Section 115BAA — an effective 25.17% once surcharge and cess are added — while eligible new manufacturers can elect 15% under Section 115BAB, an effective 17.16%. Both regimes give up other incentives in exchange for the lower headline rate.

Section 115BAA: the 22% option

Any domestic company can opt into the 22% rate, provided it forgoes specified exemptions and incentives. With a 10% surcharge and 4% health-and-education cess, the effective rate is 25.17%. Companies choosing this route are also outside the Minimum Alternate Tax net.

Section 115BAB: the 15% manufacturing rate

Newly incorporated manufacturing companies can elect a 15% rate (effective 17.16%) designed to support domestic production. Eligibility is tied to incorporation and the commencement of manufacturing within the statutory window, and to not claiming the excluded incentives. The choice, once made, is generally binding.

Key figures

• Section 115BAA: 22% headline, ~25.17% effective with surcharge and cess (Section 115BAA guide)
• Section 115BAB: 15% headline for eligible new manufacturers, ~17.16% effective
• Both regimes exit Minimum Alternate Tax but forgo most other incentives

Frequently asked questions

What is the corporate tax rate for companies in India?

A domestic company can elect 22% under Section 115BAA (an effective 25.17% with surcharge and cess), or 15% under Section 115BAB for eligible new manufacturers (an effective 17.16%), in each case by forgoing specified incentives.

Which companies qualify for the 15% rate?

The 15% rate under Section 115BAB is available to newly incorporated domestic manufacturing companies that commence manufacturing within the statutory window and do not claim the excluded incentives.

By Vijay Dhawan, Managing Partner, LexVerge LLP. Last updated 2 July 2026. This article is general information, not tax advice; confirm the current position for your facts before acting.