Section 199 - Tax on income of certain manufacturing domestic companies
This is a legacy optional manufacturing regime. Eligibility is both entity-date and activity based, and the deduction/loss sacrifice must be quantified before opting.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 199 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
This is a legacy optional manufacturing regime. Eligibility is both entity-date and activity based, and the deduction/loss sacrifice must be quantified before opting.
Who should use this section
Qualifying domestic manufacturing companies considering or continuing the legacy optional 25% regime and its deduction / loss sacrifices.
Old-law bridge
section 115BA
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
No section-specific Finance Act, 2026 textual substitution is separately flagged for section 199; the consolidated post-Finance-Act-2026 text remains the controlling version and must be used instead of pre-1 April 2026 extracts.
Professional alert
Confirm incorporation date and exclusive business profile. Prepare a deduction and loss sacrifice schedule. Record option in the return by the statutory due date.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| Rule 25 | Depreciation rule interacts with the optional manufacturing-company computation; verify attributable depreciation separately | - |
Worked application
A qualifying manufacturer has an old loss attributable to a barred profit-linked deduction. That loss cannot be set off under the section 199 computation and is treated as fully given effect.
Evidence / compliance checklist
- Confirm incorporation date and exclusive business profile (section 199 evidence control 1).
- Prepare a deduction and loss sacrifice schedule (section 199 evidence control 2).
- Record option in the return by the statutory due date (section 199 evidence control 3).
- Archive the prescribed Rule/Form output for section 199 together with the acknowledgement, filing date and underlying computation.
Common mistake
A common section 199 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Tax on income of certain manufacturing domestic companies”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Confirm incorporation date and exclusive business profile. Prepare a deduction and loss sacrifice schedule. Record option in the return by the statutory due date.
Recommended approach
For section 199, start with the legal trigger in “Tax on income of certain manufacturing domestic companies”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: Optional manufacturing-company headline rate: 25%, subject to entity-date, activity, deduction and loss conditions.
Thresholds, periods and timing checkpoints
- Optional manufacturing-company headline rate: 25%, subject to entity-date, activity, deduction and loss conditions.
Related provisions and interaction map
Section 199 operates inside Chapter XIII special-rate computation; reconcile its particular tax bucket with the relevant capital-gains, unexplained-income or corporate-regime rules, plus surcharge, cess, return and loss-set-off provisions.
Provision summary - verify verbatim text in the official Act
Text-status note: This guide does not reproduce the complete verbatim provision for section 199. Use the linked official consolidated Act before quoting sub-section language or preparing a filing, opinion or litigation document.
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 199?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.