INCOME TAX DEDUCTION IN CONCERN WITH COMPANIES

HARPAL SINGH HANSDEEP KAUR

INTRODUCTION
The government of India imposes an income tax on taxable income of individuals, Hindu Undivided Families (HUFs), companies, firms, co-operative societies and trusts (identified as body of individuals and association of persons) and any other artificial person. Levy of tax is separate on each of the persons. The levy is governed by the Indian Income Tax Act, 1961.

Deduction is the amount, which is reduced from the gross total income before computing tax. While exemptions is on income some deduction in calculation of taxable income is allowed for certain payments.

DEDUCTIONS
1) a. Contributions given by companies to political parties [SEC. 80GGA(4)] 100% Deduction There is no limit on the amount of contribution b. Contributions given by any person to political parties [SEC. 80GGC]
Persons excluding a local authority and artificial juridical person wholly or Partially funded by the government 100% Deduction There is no limit on the amount of contribution

2) Profits and gains from industrial undertaking engaged in infrastructural development etc [SEC. 80-IA] DEDUCTION allowed-- from gross total income in respect of profits and gains derived by an undertaking. Different Provisions discussed further: a. INFRASTRUCTURE FACILITY 100% deduction of the profits and gains for 10 consecutive assessment years (out of 20).[SEC. 801A(1)]
Infrastructure facility means: -Toll road, bridge, rail system -Highway project including housing or other activities -Water supply project -Port, airport, inland waterway. Conditions for deductions: -owned by company registered in India or any other body constituted under any central or state act. -It has entered into an agreement with government for developing, operating And maintaining infrastructure facility. -it has started operating infrastructure facility on or after 1April1995

b. TELECOMMUNICATION SERVICES 100% deduction for first 5 assessment years and for next 5 years @ 30% of Such profits.[SEC. 80-1A(2) , SEC. 80-1A(2A) ] Conditions for deduction [SEC. (80 1a(3) & (4)]: Operational period Underisking to be new Plant and machinery to be new c. INDUSTRIAL PARK OR SPECIAL ECONOMIC ZONE 100% deduction for 10 consecutive years Conditions for deduction [SEC. (80 1A(3) & (4)]: *if the undertaking develops, operates and maintains industrial park or special economic zone in accordance With the scheme of central government. *Industrial park be setup during the period beginning on 1April,1997 and ending on 31st march 2010.

d) i)generation of power (ii)distribution of power (iii) renovation & modernization of Existing transmission lines. 100% deduction for any 10 consecutive years out of 15 years. [sec. 80IA(1)(2)] Conditions for deduction *undertaking to be new *Plant and machinery to be new *Operational period e)Reconstruction orrevival of power generation plant owned by an INDIAN CO. [Sec. 80IA(5) 100% deduction for any 10 consecutive years out of 15 years. [sec. 80IA(1)(2)] Conditions for deduction -Indian co. should be formed before 30Nov2005 with majority equity participation by public sector cos. -Should begin to generate or distribute power before 31st march, 2011

3. Profits and gains of an undertaking of enterprise engaged in development of special economic zone[sec. 80-IAB] From assessment year 2006-07 and subsequent years. Notified on or after 1 April2005 under special economic zone act,2005.
100% deduction for any 10 consecutive years out of 15 years.

Conditions -Return of income [sec. 80-AC] -Audit of accounts [sec. 80IA(7), Sec. 80-IAB(3)] -Double deduction not allowed [sec.80-IA(9), SEC. 80-IAB(3)]

4. Profits and gains from certain industrial undertakings other than infrastructure undertakings[Sec. 80-IB] a) Small scale industrial undertakings[Sec. 80-1B(3)(II)] 30% of profit for compa-nies and 25% for others for 12 years in the case of Cooperative Societies and 10 years in the case of others. between 1ST April1995 and 31st march2002 b) Industrial undertakings located in backward state [Sec. 80-IB(4)] Industrial undertaking which begins production or operation between 1st april1993 and 31st March2004 100% of profit for initial five years and thereafter 30% for companies and 25% for other assesses, so that total number of years for which deduction is admissible will be 12 for Co-operative Societies and ten for others. In case of notified Industries In North-Eastern Region 100% deduction is admi-ssible for ten assessment years.

c) Industrial undertaking located in industrially backward districts [Sec- IB(5)]

*category A which begins production or operation between 1ST October94 and

31st March2002. 100% of profit for initial five years and thereafter 30% for companies and 25% for other assesses, so that total number of years for which deduction is Admissible will be 12 for Co-operative Societies and ten for others. In case of notified Industries in North-Eastern Region 100% deduction is admi-ssible for ten assessment years. *category B which begins production or operation between 1ST October94 and 31st March2002.100% deduction for initial three years and thereafter 30% for companies and 25% for others for further five years so that the total period for which deduction is allowable will be 8 years. (12 years for cooperative societies).

d) Industrial undertaking , operating cold chain facility for agriculture produce [Sec. 80-IB(11)] Commen-cing Operation Between 1st April1999 And 31st March2003. 100% for initials five years and thereafter 30% for companies and 25% for others so that the total period does not exceed 10 years (12 years for cooperative societies). e)Business of hotel [Sec. 80-IB(7)] The Business Of Approved Hotel (Except Those Located In Calcutta, Chennai, Delhi And Mumbai)And Which Starts Functioning Between 1st April97 And 31st March2001. 30% Deduction Of Profit For 10 Years

F) Multiplex Theatre [Sec. 80-ib(7a)] Starts Functioning Between 1st April 2002 And 31st March2005. (Except Those Located In Calcutta, Chennai, Delhi And Mumbai) 50% Deduction Of Profit For 5 Years

G) Business Of Scientific Research [Sec. 80-ib(8a)] Company Registered In India. Approved By The Prescribed Authority At Any Time Before 1st April1999. 100% Deduction Of Profits For Five Years

H) Undertaking Producing Mineral Oil/Natural Gas [Sec. 80-ib(9)] In Any Part Of India On Or After 1st April1997 (In Case Of Refining On Or After 1st October 1998) 100% Deduction Of Profits For 7 Years

i) Business Of Maintaining And Operating Hospitals In Rural Areas [Sec. 80-ib(11b)] An Undertaking Which Has Constructed A Hospital In Rural Area During The Period Beginning On 1st October2004 And Ending On 31st March2008. 100% Deduction For 5 Consecutive Years.

5. UNDERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL CATEGORY STATES [SEC. 80-IC] Conditions to be satisfied: Return of income to be furnished Accounts of enterprise or undertaking to be audited. Undertaking should be new New plant and machinery to be used. Sikkim, uttaranchal and north eastern states

Himachal pradesh or uttaranchal Sikkim or north eastern states

First 5 years Next 5 years First 10 years

Any assessee company Any assessee

100% 30% 100%

6) PROFITS AND GAINS FROM BUSINESS OF HOTELS AND CONVENTION CENTRES IN SPECIFIED AREAS [SEC. 80-ID] 100% deduction for 5 consecutive assessment years.

7. DEDUCTION IN RESPECT OF CERTAIN UNDERTAKING IN NORTH EASTERN STATES [SEC. 80-IE] Setup Of Undertaking During The Period 1st April2007 And 31st March2017. 100% deduction for 5 consecutive assessment years.

8) PROFITS AND GAINS FROM BUSINESS OF COLLECTING AND PROCESSING OF BIO-DEGRADABLE WASTE [SEC. 80JJA] 100% deduction for 5 consecutive assessment years.

9) DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN [SEC. 80JJAA] 30% deduction of additional wages, paid to new regular workmen for consecutive 3years

10) CERTAIN INCOMES OF OFFSHORE BANKING UNITS AND INTERNATIONAL FINANCIAL SERVICES CENTRE [SEC. 80LA] 100% deductions of profit for first5 consecutive years 50% for next 5 consecutive years.

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