Section-80-IA: Deductions For Gains From Industrial Undertakings

What is Section 80-IA of the income tax?

Tax holiday under section 80-IA is available to the assessees who are engaged in providing infrastructure development facility. Under this section, eligible assessee will get tax deduction on profits under business head for specified period of time.There are some specified undertakings are covered. For every eligible undertaking, different conditions, eligibility and amount of deduction given under this section. Let’s understand them in detail.
First of all, let’s understand

Under this section, there are some specified undertaking for which given below is the comprehensive list

• Provision of infrastructure facility
• Telecommunication services
• Industrial parks or special economic zone
• Power generation, transmission and distribution
• Undertaking set up for reconstruction of a power unit and
• A cross country natural gas distribution network

Now we will understand eligibility, amount of deduction etc for each undertaking one by one.

What is meaning of Infrastructure development/ specified undertaking under section 80IA ?

A. Infrastructure Facility

• 1. Who are eligible to claim this deduction ?

  The enterprise which is owned by an Indian company who is engaged in providing infrastructure facility.

  Infrastructure facility here means :

  • A road including toll road, a bridge or a rail system
  • A highway project
  • A water supply project
  • A port, airport, inland waterways or inland port or navigational channel is the sea

• 2.What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given in the section to claim tax holiday. Here are the insight of conditions :

  • Period of commencement :- Enterprise starts providing infrastructure facility on or after 01 April, 1995. Further, one point needs to be noted that entreprise who start providing infrastructure facility after 01 April, 2017 is not eligible to claim deduction.
  • Income Tax Return :- One of the condition attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1)
    Example :- For F.Y. 2018-19, due date of return filing for companies was 30 September, 2019. However, A ltd filed his ITR on 05 October, 2019 claiming deduction u/s 80-IA. In this case, A Ltd is not eligible to claim deduction u/s 80-IA.
  • Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.

• 3. What is the amount of deduction available under section 80-IA ?

  Under this section, assessee can claim

  100% of the profit is allowed as deduction for 10 consecutive Assessment Years
  Now, the very first question comes into the mind is that from which Assessment year assessee is eligible to claim deduction for 10 continuous Assessment Years. We can call first year of deduction ‘Initial Assessment Year’
  Deduction need not be taken from the first year of operation,this option is with assessee to decide Initial Assessment Year to claim deduction. But Initial Assessment year should start within a period of 15th Assessment Year in which an assessee start operating infrastructure facility.

• 4. Other points :

  If an eligible undertaking transfer infrastructure facility to another enterprise in that can transferee enterprise is eligible to claim deduction for remaining period.

B. Telecommunication services

• 1. Who are eligible to claim this deduction ?

  An undertaking engaged in providing telecommunication services whether basic or cellular, including radio paging, domestic satellite service, network of trunking, broadband network and internet services.

• 2. What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given in the section to claim tax holiday for telecommunication services. Here are the insight of conditions :

  • Period of commencement :- Enterprise starts providing telecommunication services on or after 01 April, 1995. Further, one point needs to be noted that entreprise who start providing infrastructure facility after 31 March, 2005 is not eligible to claim deduction.
  • Income Tax Return :- One of the condition attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1)
  • Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
  • New Enterprise :- It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or a business already in existence.
  • Exception of New enterprise condition :- Any undertaking discontinued due to extensive damage or destruction of (any building, machinery, plant or furniture owned and used for such business) due to any natural calamity or other unforeseen circumstances such as:-
    1. Flood, typhoon, hurricane, cyclone, earthquake or other natural calamity, or
    2. riot or civil disturbance, or
    3. accidental fire or explosion, or
    4. enemy action or action taken in combat,
• 3. What is the amount of deduction available under section 80-IA ?

  Under this section, assessee can claim

  Amount of deduction	Period
  100% of profit	For first 5 years
  30% of profit	Next 5 years

  Initial Assessment year to be decided by the assessee at his option but not beyond than 15th Assessment Year in which an assessee start operating telecommunication services.

C. Industrial parks or special economic zone

• 1. Who are eligible to claim this deduction ?

  The enterprise which develops and operates industrial park or special economic zone notified by central government.

• 2. What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given in the section to claim tax holiday. Here are the insight of conditions :

  1. Period of commencement :-

     Enterprise	Year of commencement	Year
     Special Economic Zone	On or after 01 April, 1997	Before 31 March, 2005
     Industrial park	On or after 01 April, 2009	Before 31 March, 2011

  2. Income Tax Return :- One of the condition attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1)
  3. Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
• 3. What is the amount of deduction available under section 80-IA ?

  Under this section, assessee can claim

100% of the profit is allowed as deduction for 10 consecutive Assessment Years
Initial Assessment year to be decided by the assessee at his option but not beyond than 15th Assessment Year in which an assessee start operating telecommunication services.

D. Power generation, transmission and distribution

• 1. Who are eligible to claim this deduction ?

  An undertaking which is set up in any part of India for the generation or generation & distribution of power.

• 2. What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given in the section to claim tax holiday for power generation, transmission and distribution. Here are the insight of conditions :

  1. Period of commencement :- Enterprise starts its operation at any time between 01 April, 1993 and 31 March, 2017. Alternatively, it starts transmission or distribution at any time between 01 April, 1999 and 31 March, 2017.The power plant offers restoration and improvement of the network for the duration of 1st April 2004 to 31st March 2011.
  2. Income Tax Return :- One of the condition attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1)
  3. Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
  4. New Enterprise :- It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or a business already in existence.
  5. Exception of New enterprise condition :- Any undertaking discontinued due to extensive damage or destruction of (any building, machinery, plant or furniture owned and used for such business) due to any natural calamity or other unforeseen circumstances such as:-

  i. Flood, typhoon, hurricane, cyclone, earthquake or other natural calamity, or
  ii. Riot or civil disturbance, or
  iii. Accidental fire or explosion, or
  iv. Enemy action or action taken in combat,
  and such business is re-established or revived within 3 years from the end of such previous year.

• 3. What is the amount of deduction available under section 80-IA ?

  Under this section, assessee can claim

100% of the profit is allowed as deduction for 10 consecutive Assessment Years from initial Assessment year

E. Reconstruction of a power unit

• 1. Who are eligible to claim this deduction ?

  An undertaking which is set up for reconstruction or revival of a power generating plant.It should be owned by an Indian Company.

• 2. What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given in the section to claim tax holiday for reconstruction or revival of a power unit. Here are the insight of conditions :

  1. Period of commencement :-

     Particular	Period
     Formation with majority equity participation	Before 30 November, 2005
     Operation begins	Before 31 March, 2011

  2. Income Tax Return :- One of the conditions attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1)
  3. Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
• 3. What is the amount of deduction available under section 80-IA ? Under this section, assessee can claim

100% of the profit is allowed as deduction for 10 consecutive Assessment Years Deduction need not be taken from the first year of operation,this option is with assessee to decide Initial Assessment Year to claim deduction. But Initial Assessment year should start within a period of 15th Assessment Year in which an assessee start operating infrastructure facility.

F. Cross country natural gas distribution network

• 1. Who are eligible to claim this deduction ?

  An undertaking which is owned by an India Company carrying on business of laying & operation cross - country natural gas distribution network including pipelines & storage facilities being an integral part of such network.

• 2. What are the conditions to claim deduction u/s 80-IA ?

  There are certain conditions given to claim tax holiday. Here are the insight of conditions :

  1. Period of commencement :- It should start functioning on or after 01 April, 2007.
  2. Income Tax Return :- One of the conditions attached with this section is that assessee needs to file his Income Tax Return and should also claim the amount of deduction in return. Moreover, income tax return needs to be filed on time as per section 139(1).
  3. Audit Report :- This deduction is allowed if accounts of the assessee has been audited by a CA as per the requirement. The audit report duly signed & verified by CA and furnished audit report along with the return of income. Audit report to be submitted in Form 10CCB.
  4. New Enterprise :- It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or a business already in existence.
  5. It has been approved by the Petroleum and Natural Gas Regulatory Board and one third of its total pipeline capacity is available for common use.
• 3. What is the amount of deduction available under section 80-IA ?

  Under this section, assessee can claim

100% of the profit is allowed as deduction for 10 consecutive Assessment Years Deduction need not be taken from the first year of operation,this option is with assessee to decide Initial Assessment Year to claim deduction. But Initial Assessment year should start within a period of 15th Assessment Year in which an assessee start operating infrastructure facility.