# Section 115BAC — Disallowed Deductions in Concessional Regime

Section 115BAC offers a concessional tax regime (the default regime for individuals/HUF/AOP/BOI/AJP from AY 2024-25 onwards). In return for lower slab rates, several deductions/exemptions are NOT allowed.

## Deductions/Exemptions NOT available under 115BAC

Section	Item	Note
Sec 32(1)(iia)	Additional Depreciation	20% of cost for new P&M of manufacturing / generation of electricity — disallowed.
Sec 35(1)(ii)	Donation to approved Research Association / University / IIT / National Lab — for scientific research	Disallowed.
Sec 35(1)(iia)	Payment to Indian Co. engaged in R&D	Disallowed.
Sec 35(1)(iii)	Payment to approved University / College for social science / statistical research	Disallowed.
Sec 35(2AA)	Payment to IIT / National Lab / University with specified direction for scientific research	Disallowed.
Sec 35(1)(iv)	In-house scientific research expenditure	Allowed (this one IS allowed).
Sec 35AD	Specified business deduction (cold chain, warehouse, hotel, hospital etc.)	Disallowed.
Sec 10AA	SEZ Units exemption	Disallowed.

## Key Rule on AMT (Alternate Minimum Tax)

> If the assessee has opted OUT of the default (115BAC) regime and has claimed deduction u/s 10AA or 35AD, then AMT applicability must be checked.

If assessee stays in default 115BAC regime → AMT does not apply (as those deductions are already disallowed).

## Quick decision flow

```

Assessee under 115BAC (default)?

│

├── YES → Additional Dep / 35 series / 35AD / 10AA all DISALLOWED → No AMT issue

│

└── NO (opted out) → All deductions allowed (subject to other rules)

→ Check AMT u/s 115JC if 35AD / 10AA claimed

```

Worked example

### Example 1

Example: Mr. P (Individual) is engaged in manufacturing and has purchased new P&M for ₹50 lakh in PY 2024-25. He is under the default 115BAC regime. Treatment: He can claim normal depreciation but NOT additional depreciation @ 20% (₹10 lakh). If he opts out of 115BAC, additional depreciation is allowable.

### Example 2

Example: XYZ Ltd has set up a cold chain facility (specified business u/s 35AD) and is eligible for 100% deduction of capital expenditure. The company opts OUT of 115BAA. Treatment: 35AD deduction is allowed, BUT now AMT u/s 115JC must be tested at 18.5% on Adjusted Total Income.

⚠️ Common exam mistakes

Claiming additional depreciation while in default 115BAC regime.
Forgetting that Sec 35(1)(iv) — in-house research — IS allowed even under 115BAC.
Ignoring AMT applicability when 35AD / 10AA is claimed after opting out of default regime.
Confusing 'opting out of 115BAC' with 'still being under 115BAC' — only those who opt out can claim these deductions.

Bare-Act text Section 115BAC(2) · Income-tax Act, 1961 · click to expand

Section 115BAC(2): For the purposes of sub-section (1A), the total income of the individual or HUF or AOP/BOI/AJP shall be computed,— (i) without any exemption or deduction under the provisions of clause (5) or clause (13A)… section 10AA, section 16, clause (b) of section 24… clause (iia) of sub-section (1) of section 32, section 32AD, section 33AB, section 33ABA, sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) of section 35, section 35AD, section 35CCC…

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Section 115BAC – Concessional Tax Regime: Deductions NOT Allowed

Worked example

⚠️ Common exam mistakes