Simple And Latest Version of Deductions In Respect of Certain Incomes (80IA To 80IE)

The Deductions in respect of section 80IA to 80 IE is quite confusing. Therefore those sections create so many problems to Commerce Professionals, teachers and students. Hence, I tried to simplify these section through this article for the benefit of not only the academic community but also for the professional community.

Deduction from sec 80IA to 80IE is allowed to the assesse only if the assesse  furnishes return of income on or before the due date specified in section 139(1).

1. Deduction in respect of profits and gains from undertakings or Enterprise engaged in Infrastructure Development (Sec 80-IA).

Company can claim the following deductions if it undertakes the following activities

A. Developing or operating or maintaining Infrastructure facility No Deduction is allowed to the enterprise which starts those operations mentioned in (A) after 01/4/2017

B. Developing or operating or maintaining Industrial Parks and special Economic Zones. The relevant dates are as follows:-

i. Industrial Park—–between 31/3/1997 and 1/4/2011

ii. Special Economic Zones—between 31/3/1997 and 1/4/2006

C. Generation and distribution of power

i. Generation and distribution of power begins after 31/3/1993 but before 1/4/2017

ii. Starts transmission or distribution by laying a network of new transmission or distribution lines after 31/3/1999 but before 1/4/2017

iii. Undertakes substantial renovation and modernization of the existing network of transmission or distribution lines after 31/3/2004 but before 1/4/2017

D. Reconstruction or revival of a power generating plant

Quantum and period of deduction.

100% of such profits for ten consecutive assessment years.

General Conditions

i. The undertaking is not formed by an splitting up or reconstruction of existing unit

ii. The undertaking is not formed by transfer of machinery or plant previously used for any Purpose (usage of upto 20% of Previously used plant and machinery is allowed)

Other provisions related with this section are following:-

i. Computation of income for deduction

Computation of income for distribution can be done as follows-

Please consider the example.

Question–

X Ltd Two business .Business K is eligible for deduction u/s 80IA and Business L is not eligible for such deduction. The profit /loss of the above businesses for the last three years are as follows-

Previous year Business k(80-IA Unit) Business L
2015-2016 (50,000) 1,40,000
2016-2017 30,000 180,000
2017-2018 70,000 120,000

Answer

A. Total Income in 2015-2016=90,000

Deduction under Sec 80IA-Nil

B. Total Income in 2016-2017=210,000

Deduction under Sec 80IA=Nil

C. Total Income in 2017-2018=70,000+120,000-50,000(Deduction under sec 80IA)=140,000

ii. Audit of Accounts

Audit by CA is necessary and the assesse is to send the audit report along with the return of Income

iii. Withdrawal of deduction

The government may withdraw the deduction in respect of certain undertakings after making enquiry.

iv. The deduction under this section shall not be allowed to special Economic Zone notified after 31/3/2005.

2. Deduction in respect of profits and gains from undertakings or Enterprise engaged in development of Special Economic Zone (Sec 80-IAB).

Eligible assessee

Developer engaged in the business of developing a SEZ notified on or after 01/4/2005 but before 01/4/2017.

Quantum and period of deduction.

100% of such profits for ten consecutive assessment years

Other provisions related with this section are following:-

i. Computation of income for deduction

Computation of income for distribution should be done as follows-

Please consider the example.

Question–

X Ltd Two business. Business K is eligible for deduction u/s 80IA and Business L is not eligible for such deduction. The profit /loss of the above businesses for the last three years are as follows-

Previous year Business k(80-IA Unit) Business L
2015-2016 (50,000) 1,40,000
2016-2017 30,000 180,000
2017-2018 70,000 120,000

Answer.

A. Total Income in 2015-2016=90,000

Deduction under Sec 80IA-Nil

B. Total Income in 2016-2017=210,000

Deduction under Sec 80IA=Nil

C. Total Income in 2017-2018=70,000+120,000-50,000(Deduction under sec 80IA)=140,000

ii.Audit of Accounts

Audit by CA is necessary and the assesse is to send the audit report along with the return of Income

iii.Withdrawal of deduction

The government may withdraw the deduction in respect of certain undertakings after making enquiry.

3. Deduction in respect of profits and gains from specified start-up business (Sec 80-IAC).

Eligible Assessee

1. Company

2. LLP.

Conditions

i.The Assessee is incorporated on or after 01/4/2016 but before 01/4/2019

ii.The total Turnover does not exceed Rs.25 crores in any previous years from 2016-17 to 2020-2021

Quantum and period of deduction

100% of such profits for three consecutive assessment years

General Conditions

i.The undertaking is not formed by an splitting up or reconstruction of existing unit

ii.The undertaking is not formed by transfer of machinery or plant previously used for any purpose(usage of upto 20% of Previously used plant and machinery is allowed)

Other provisions related with this section are following:-

i. Computation of income for deduction

Computation of income for distribution should be done as follows-

Please consider the example.

Question–

X Ltd Two business .Business K is eligible for deduction u/s 80IA and Business L is not eligible for such deduction. The profit /loss of the above businesses for the last three years are as follows-

Previous year Business k(80-IA Unit) Business L
2015-2016 (50,000) 1,40,000
2016-2017 30,000 180,000
2017-2018 70,000 120,000

Answer

A. Total Income in 2015-2016=90,000

Deduction under Sec 80IA-Nil

B. Total Income in 2016-2017=210,000

Deduction under Sec 80IA=Nil

C. Total Income in 2017-2018=70,000+120,000-50,000(Deduction under sec 80IA)=140,000.

Audit of Accounts

Audit by CA is necessary and the assesse is to send the audit report along with the return of Income.

iii.Withdrawal of deduction

The government may withdraw the deduction in respect of certain undertakings after making enquiry.

4.Deduction in respect of profits and gains other than infrastructure Development undertakings (Sec 80-IB).

ownership location Date of commencement Period of tax exemption quantum
1. Commerical production of mineral oil Any assessee Any part of India After 31/3/1997 but before 1/4/2017 7 Initial A.Ys 100% of profits
2. Commerical production of Natural Gas under NELP VIII etc Any assessee Any part of India After 31/3/2009 but before 1/4/2017 7 Initial A.Ys 100% of profits
3. Housing Project Any assessee Any part of India After 30/9/1998 but before 31/3/2008 7 Initial A.Ys 100% of profits
4.Integrated business of handling. storage and transportation of food-grains Any assessee Any part of India After 31/3/2001 5 Initial A.Ys Next 5A.Ys 100% of profits

30% for companies and 25% for others

5.Processing ,Preservation and Packaging of fruits or egetables Any assessee Any part of India w.e.f A.Y 2005-06 5 Initial A.Ys Next 5A.Ys 100% of profits 30% for companies and 25% for others
6.processing preservation and packaging of maeat ,meat products or poultry or marine or diary products Any assessee Any part of India After 31/3/2009 5 Initial A.Ys Next 5A.Ys 100% of profits

30% for companies and 25% for others

 

5. Deductions in respect of profits and gains from housing projects (80 IBA)

Eligible Assessees

All Assessees engaged in the business of developing and building affordable housing projects approved by competent authority after 01/6/2016 but before 01/4/2020.

Quantum and period of deduction. 

100% of profits derived from such business if it fulfils certain conditions.

6.Deduction in respect of profits and gains from undertakings or Enterprises Special Category States (Sec 80-IC).

Eligible Business.

Manufacture or production of any article or thing specified in 14th schedule beginning from 07/1/2003 and ending before 01/4/2012 ,in the states of Himachal Pradesh and Uttaranchal

Conditions

a. The undertaking should be situated  in the specified location, which begins to manufacture or produce any article or thing and to an existing undertaking which undertakes substantial expansion and is engaged in manufacture of article or thing

b. The deduction is available where the business is carried on in any

-i.Export Processing Zone

ii.Integrated Infrastructure Development Centre

iii.Industrial Growth centre

iv.industrial estate

v.industrial park

vii.Software Technology park

viii.industrial area

ix.Theme park .

Quantum and period of deduction

100% of profits and gains for first 5 assessment years

Then 25% (30% for companies) for subsequent 5 assessment years is eligible for deduction.

General Conditions

i.The undertaking is not formed by an splitting up or reconstruction of existing unit

ii.The undertaking is not formed by transfer of machinery or plant previously used for any purpose(usage of upto 20% of Previously used plant and machinery is allowed)

Other provisions related with this section are following:-

1. Computation of income for deduction

Computation of income for distribution should be done as follows-

Please consider the example

Question–

X Ltd Two business .Business K is eligible for deduction u/s 80IA and Business L is not eligible for such deduction. The profit /loss of the above businesses for the last three years are as follows-

Previous year Business k(80-IA Unit) Business L
2015-2016 (50,000) 1,40,000
2016-2017 30,000 180,000
2017-2018 70,000 120,000

Answer.

A. Total Income in 2015-2016=90,000

Deduction under Sec 80IA-Nil

B. Total Income in 2016-2017=210,000

Deduction under Sec 80IA=Nil

C. Total Income in 2017-2018=70,000+120,000-50,000(Deduction under sec 80IA)=140,000

ii. Audit of Accounts

Audit by CA is necessary and the assesse is to send the audit report along with the return of Income.

iii.Withdrawal of deduction

The government may withdraw the deduction in respect of certain undertakings after making enquiry.

7.Deduction in respect of profits and gains in respect of certain undertakings in North –Eastern States (Sec 80-IE).

The deduction shall be allowed to an undertaking has begun production during the following period in any of the following North –Eastern States

Period-1/4/2007 to 1/4/2017

North Eastern States means

Arunchal Pradesh

Assam

Manipur

Meghalaya

Mizorm

Nagaland

Sikkim

Tripura.

Production Activities  which are eligible for deduction.

i.To manufacture or produce any eligible article or thing

ii.to undertake substantial expansion to manufacture or produce any eligible article or thing

iii.to carry on any eligible business.

Eligible business means

i.hotel not below two star category

ii.adventure and leisure sports

iii.providing medical and health services

iv.cunning old age home

v.bio-technology related ones

etc

Quantum and period of deduction

100% of the profits derived from such business for 10 consecutive assessment years commencing with the initial assessment years.

General Conditions

i.The undertaking is not formed by an splitting up or reconstruction of existing unit

ii.The undertaking is not formed by transfer of machinery or plant previously used for any purpose(usage of upto 20% of Previously used plant and machinery is allowed)

Other provisions related with this section are following:-

i. Computation of income for deduction

Computation of income for distribution should be done as follows-

Please consider the example

Question–

X Ltd Two business .Business K is eligible for deduction u/s 80IA and Business L is not eligible for such deduction. The profit /loss of the above businesses for the last three years are as follows-

Previous year Business k(80-IA Unit) Business L
2015-2016 (50,000) 1,40,000
2016-2017 30,000 180,000
2017-2018 70,000 120,000

Answer

A.Total Income in 2015-2016=90,000

Deduction under Sec 80IA-Nil

B.Total Income in 2016-2017=210,000

Deduction Under Sec 80IA=Nil

C.Total Income in 2017-2018=70,000+120,000-50,000(Deduction under sec 80IA)=140,000.

ii.Audit of Accounts

Audit by CA is necessary and the assesse is to send the audit report along with the return of Income

iii.Withdrawal of deduction

The government may withdraw the deduction in respect of certain undertakings after making enquiry.

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