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DEDUCTION'S UNDER CHAPT!R


IFS IFHP IFB CG IFOS GTI (-) Deductions 80 -IA -ITS.P.P. 80 -IB -I. M.H2SC3 80 -IC - HUSN 80 -10 - H/CC 80 -IE - SN 80 -lAB - SEZ NTI XX XX XX/ XX XX

VI A

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RBR - SHIW 100% dedn. for any 10 consecutive years out of first 20 years. A '\ PAIN 100% dedn. (10/15 yrs.l

SECTION80 - IA

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Under this section, deduction is allowed of income from following business:

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100% (First 5 yrs.) 30% (Next 5 yrs.) (10/15 yrs.)

100% dedn. (10/15 yrs.J '

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Business of developing, operating or maintaining infrastructure R - Roads B - Bridges R - Railways S - Sewerage system H - Highway project I - Irrigation project W - Water supply project

facility.

P - Ports A - Air ports I - Inland water ways N - Navigation channel

Business of operating telecommunication services. (For business started upto 31.3.05) Business of developing SEZ and Industrial park ,
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Business of ge eration & distribution of power Business of re onstruction & revival of power generating plants
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PRIME VISION / C.A. FINAL / TAXATION / DEDUCTIONS UNDER CHAPTER VI A

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100% deduction (10/15 years)

SECTION 80 - lAB

Under this section, deduction is allowed in respect of business of developing BEZ (after 31.3.05)

SECTION 80 - IB Under this section, deduction is allowed in respect of following business:

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Co. - 30% (10 yrs. J Others- 25% (10 yrs.l

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100%
(10 yrs.) Co.

BO

100%
(7 yrs.J

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Hospital Project 100% (5 yrs.)

- 100% (5 yrs.) 30% (5 yrs.)

Project 100%

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Others - 100% (5 yrs.l 25% (5 yrs.J


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CO.
- 100% (5 yrs.) 30% (5 yrs.) Others - 100% (5 yrs.J 25% (5 yrs.)

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(3 yrs.)
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Industrial undertaking (manufacturing business)

-+ SSI - Small Scale Industry -+ BS - Backward State -+ BD - Backward District (Category


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A & Category BJ

Production and refining of mineral oil and production of natural gas. Housing Project
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PRIME VISION / C.A. FINAL / TAXATION / DEDUCTIONS UNDER CHAPTER VI A

Deduction is allowed if all the following G.gnditionsare satisfied: . A L R S 12 .'I


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A - The project should be approved by local authority before 31.3. DB. L - The area of the land should be min 1 acre R - Area of each residential unit should not exceed - 1,000 sq. feet (for projects in Mumbai & Delhi) - 1,500 sq. feet (for projects in other places) S - Area reserved for shops and commercial establishments should not exceed 3% of total built up area
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5,000 sq. feet

I - Maximum 1 residential unit should be allotted to a non-individual I - If a residential unit is allotted to an individual then another residential unit should not be allotted to its relatives

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Hospitals

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Min 100 beds for patients Should be located in any area (except metro cities and few excluded areas)

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Indian co. engaged in scientific research & development Cold chain facility for agricultural produce Preservation, processing & packaging of fruits. meat & meat products, vegetables, poultry products, marine products and dairy products (PPP - FMV . PMOJ Handling, storage and transportation of food grains (HST - FG)

PRIME VISION / C.A. FINAL / TAXATION

/ DEDUCTIONS

UNDERCHAPTER

VI A

SECTION 80 - Ie Under this section, deduction is allowed in respect Irnanutacturin business) located in following places: of income from industrial undertaking

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Co.
- 100% (5 vrs.) 30% (5 yrs.J Others - 100% (5 yrs.) 25% (5 yrs.J 100% dedn.

HUSN-_

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[8] Himachal {QQ

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Pradesh

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Uttaranchal ~esb

lID Sikkim
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Eastern States (Manipur, Mizoram, Meghalaya, Assam, Arunachal Pradesh, Nagaland,TripuraJ SECTION 80 - IE

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undertaking

Under this section, deduction is allowed in respect of income from industrial (manufacturing business) or other eligible business located in following places:

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after 31.3.07

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SECTION 80 - 10

100% dedn. (10 yrs.)

. Under this section, deduction is allowed in respect 'Convention centres (located in specified areas) 100% deduction

of income from business of hotels and


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! n= 5 yrs.)
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PRIME VISION / C.A. FINAL / TAXATION

/ DEDUCTIONS

UNDER CHAPTER
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VI A
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CONDITIONS
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Under all the sections, deduction is allowed if following conditions are satisfied: B - P A R3 S
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B - Business should be newly established. It should not be formed by splitting up or reconstruction of an existing business. However, jf a business is discontinued due to NRFE and if it is re-established within 3 years from the end of the year in ~hich' business is discontinued then such business is treated as NEWLY ESTABLISHED. ~-r I 1<" a 0 ' r 1'" P - Plant & machinery required in the business should be new. However, use of second hand P & M is allowed as follows: Total P & M
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20% of Total
secont hand i Imported secont hand Balance

ARRR-

Allowed Allowed Should be "NEW" Accounts should be audited Report of CA should be furnished Return should be filed in time If the assessee shows excessive profits then the AD can recompute the profits for purpose of deduction. II' (Jlf 1 i'" A-J rl "
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S - SINGLE SOURCE ASSUMPTION For the ur as ~ductiPn it i income for the assessee. ""--'--"---E.g. "
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Year

Business! (Eligible)

Business B [Not eligible)

1st 5 yrs. 100% dedn.

30%
dedn.

1 2 3 4 5 6 7 8 9 10

(90) . 40 ~'11 95 J U 60 80 100

400 30 200 170 (50) (60)

Deduction [Actual basis) [Assumption) 310 , 70 0

( GTI

295 230 30 f 40
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45 60 30 30
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310 70 250 170


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Loss of 80 in year 1 is actually set-off in year 1 itself against profit of business B. But for the purpose of deduction, business A is assumed as the single source, Accordingly, loss of 90 is . assumed to be carried forward and the profit of year 2 i.e. ~ 40 is used to set-off blf loss of 90. Hence, no deduction in year 2. Balance loss of ~ 50 is set-off in year 3 and remaining profit of year 3 i.e. ~ 45 is eligible for deduction in year 3. In year 5, deduction is exceeding GTIwhich is ~A. Hence, the deduction is restricted to GTI.

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PRIME VISION / C.A. FINAL / TAXATION / DEDUCTIONS UNDER CHAPTER VI A

EXPORT
DEDUCTION U/S 10AA
IFS IFHP IFB (-l Deduction u/s 10AA XX XX XX

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CG
IFOS GTI (-J Deduction u/c VI A

XX XX XX XXX (XJ

XXX Deduction u/s 10AA if ex ort~bus~ess is located in SEZ. Amount of Deduction = Taxable IFB of eligible unit x Export turnover of eligible unit (Note
Total turnover of eligible uni
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Deduction 100% of above formula 50% of above formula (jJ 50% of above formula (iiJ Amt. transfer to qEZRARA, C ~( Special Economic Zone Re-investment Allowance Reserve Alc First 5 yrs. Next 5 yrs. Next 5 yrs.

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Not e 1 EXPORT TURNOVER


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Export proceeds brought in India in ~ foreign exchange within 8m from the end of previous year or such extended time as may be allowed by RBI/Other competent authority , I I
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Export proceeds deposited in a~~i~1 permission of RBI (within Brn)

~ank Alc opened outside India with the

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PRIME VISION / C.A. FINAL / TAXATION / DEDUCTIONS UNDER CHAPTER VI A

CONDITIONS
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6 conditions of Section 80 IA... etc. are also applicable u/s 10AA [8. PAR3
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In the last 5 ears (out of pt 15 years) following additional conditions should be satisfied:
(1)

The assessee should create SEZRARA in last 5 years. This reserve should be utilized for acquisition of plant & machinery within 3 years from the ~d of the yeac in which such reserve is created (within 3 years it should be acquired and put to be use). Till the acquisition of plant & machinery, the reserve can be used for business purpose EXCEPT"DAR". [ t.J II IY' -I ~v o - Dividend distribution
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(2)

(3)

A - Asset location outside India R - Remittance outside India


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If the reserve is not use within 3 years for purchase of plant & machinery then the unused amount will be taxable in 4 t.years. If the reserve is misused (OAR) then the misused amount will be taxable in the year of misutilisation. \
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(5)

Along with the return of income, the assessee should furnish the details of plant & machinery [in the year in which plant & machinery is put to use).

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