DEDUCTIONS

1. General Provisions:
Section 10 exempts certain incomes. Such income are excluded from total income and do not enter into
the computation process at all. On the other hand, Chapter VI-A contains deductions from gross total
income. The important point is that if there is no gross total income, then no deductions will be
permissible. This Chapter contains deductions in respect of certain payments, deductions in respect of
certain incomes and other deductions.
Section 80A:
(i) Section 80A(1) provides that in computing the total income of an assessee, there shall be allowed
from his gross total income, the deductions specified in sections 80C to 80U.
(ii) According to section 80A (2), the aggregate amount of the deductions under this chapter shall not,
in any case, exceed the gross total income of the assessee. Thus, an assessee cannot have a loss as
a result of the deduction under Chapter VI-A and claim to carry forward the same for the purpose
of set-off against his income in the subsequent year.
(iii) Section 80A (3) provides that in the case of AOP/BOI, if any deduction is admissible under section
80G/80GGA/80GGC/80-IA/80-IB/80-IC/80-ID/80-IE, no deduction under the same section shall be
made in computing the total income of a member of the AOP or BOI in relation to the share of
such member in the income of the AOP or BOI.
(iv) The profits and gains allowed as deduction under section 10AA (i.e. SEZ) or under any provision of
Chapter VIA under the heading "C.-Deductions in respect of certain incomes" in any assessment
year, shall not be allowed as deduction under any other provision of the Act for such assessment
year [Sub-section (4)];
(v) The deduction, referred to in (iv) above, shall not exceed the profits and gains of the undertaking
or unit or enterprise or eligible business, as the case may be [Sub-section (4)];
(vi) No deduction under any of the provisions referred to in (iv) above, shall be allowed if the
deduction has not been claimed in the return of income [Sub-section (5)];
(vii) The transfer price of goods and services between such undertaking or unit or enterprise or eligible
business and any other business of the assessee shall be determined at the market value of such
goods or services as on the date of transfer [Sub-section (6)].
(viii) For this purpose, the expression "market value" has been defined to mean,-
a. in relation to any goods or services sold or supplied, the price that such goods or services
would fetch if these were sold by the undertaking or unit or enterprise or eligible business in
open market, subject to statutory or regulatory restrictions, if any;
b. in relation to any goods or services acquired, the price that such goods or services would cost
if these were acquired by the undertaking or unit or enterprise or eligible business from the
open market, subject to statutory or regulatory restrictions, if any;
(ix) Where a deduction under any provision of this Chapter under the heading “C – Deductions in
respect of certain incomes” is claimed and allowed in respect of the profits of such specified
business for any assessment year, no deduction under section 35AD (Investment linked tax
incentives for specified business) is permissible in relation to such specified business for the same
or any other assessment year.
(x) In short, once the assessee has claimed the benefit of deduction under section 35AD for a
particular year in respect of a specified business, he cannot claim benefit under Chapter VI-A
under the heading “C.-Deductions in respect of certain incomes” for the same or any other year
and vice versa.
Section 80AB: This section provides that for calculation of deductions in Chapter VI-A under the heading
“C - Deductions in respect of certain incomes”, the net income computed in accordance with the
provisions of the Act (before making any deduction under Chapter VI-A) shall alone be regarded as
income received by the assessee and which is included in his GTI. Accordingly, deductions specified in
the aforesaid sections will be calculated with reference to this net income and not with reference to GTI.
This is notwithstanding anything contained in the respective sections of Chapter VI-A.
Section 80AC: Furnishing return of income on or before due date mandatory for claiming exemption
under sections 80-IA, 80-IAB, 80-IB, 80-IC, 80-ID and 80-IE
(i) Section 80AC stipulates compulsory filing of return of income on or before the due date specified
under section 139(1), as a pre-condition for availing benefit under the following sections –
a. Section 80-IA applicable to undertakings or enterprises engaged in infrastructure
development, etc.
b. Section 80-IAB applicable to undertakings or enterprises engaged in any business of
developing a special economic zone.
c. Section 80-IB applicable to certain industrial undertakings other than infrastructure
development undertakings.
d. Section 80-IC applicable to certain undertakings or enterprises in certain special category
States.
e. Section 80-ID applicable to undertakings engaged in the business of hotels and convention
centers in specified area.
f. Section 80-IE applicable to certain undertakings in North-Eastern States.
(ii) The effect of this provision is that in case of failure to file return of income on or before the
stipulated due date, the undertakings would lose the benefit of deduction under these sections.
Section 80B (5): “Gross total income” means the total income computed in accordance with the
provisions of the Act without making any deduction under Chapter VI-A. “Computed in accordance with
the provisions of the Act” implies—
(i) That deductions under appropriate computation section have already been given effect to;
(ii) That income of other persons, if includible under sections 60 to 64, has been included;
(iii) The intra head and/or inter head losses have been adjusted; and
(iv) That unabsorbed business losses, unabsorbed depreciation etc., have been set-off.

2. Deductions in respect of payments:

2.1 Deduction in respect of investment in specified assets [Section 80C]
(i) Section 80C provides for a deduction from the GTI, of savings in specified modes of investments.
(ii) Deduction under section 80C is available only to an individual or HUF.
(iii) The maximum permissible deduction under section 80C is 1,50,000.
(iv) The following are the investments/contributions eligible for deduction –
1) Premium paid on insurance on the life of the individual, spouse or child (minor or major) and
in case of HUF, any member thereof. This will include a life policy and an endowment policy.
For the purpose of calculating the actual capital sum assured under this clause,
(a) the value of any premiums agreed to be returned or
(b) the value of any benefit by way of bonus or otherwise, over and above the sum actually
assured, shall not be taken into account.
In case the insurance policy has varied sum assured during the term of policy then the
minimum of the sum assured during the life time of the policy shall be taken into
consideration for calculation of the “actual capital sum assured” for section 80C, in respect of
life insurance policies to be issued on or after 1st April, 2012.
The following is a tabular summary of the exemption available under section 10(10D) and
deduction allowable under section 80C vis-à-vis the date of issue of such policies –

Exemption u/s 10(10D) Deduction u/s 80C

In respect of policies Any sum received under a LIP Premium paid to the extent of
issued between including the sum allocated by 20% of “actual capital sum
1.4.2003 and way of bonus is exempt. assured”.
31.3.2012 However, exemption would not
be available if the premium
payable for any of the years
during the term of the policy
exceeds 20% of “actual capital
sum assured”.
In respect of policies Any sum received under a LIP Premium paid to the extent of
issued on or after including the sum allocated by 10% of “minimum capital sum
1.4.2012 but before way of bonus is exempt. assured”.
1.4.2013 However, exemption would not
be available if the premium
payable for any of the years
during the term of the policy
exceeds 10% of “minimum
capital sum assured” under the
policy on the happening of the
insured event at any time during
the term of the policy.
In respect of policies (a) Where the insurance is on the life of a person with disability or
issued on or after severe disability as referred to in section 80U or a person suffering
1.4.2013 from disease or ailment as specified under section 80DDB.
Any sum received under LLP Premium paid to the extent of
including the sum allocated by 15% of “minimum capital sum
way of bonus is exempt. assured”
However, exemption would not
be available if the premium
payable for any of the years
during the term of the policy
exceeds 15% of “minimum
capital sum assured” under the
policy on the happening of the
insured event at any time during
the term of the policy.
(b) Where the insurance is on the life of any person, other than
mentioned in (a) above
Any sum received under a LIP Premium paid to the extent of
including the sum allocated by 10% of “minimum capital sum
way of bonus is exempt. assured”.
However, exemption would not
be available if the premium
 payable for any years during the
term of policy exceeds 10% of
“minimum capital sum assured”
under the policy on the
happening of the insured event
at any time during the term of
the policy.
2) Premium paid to effect and keep in force a contract for a deferred annuity, not necessarily be
with an insurance company, on the life of the assessee and/or his or her spouse or child,
provided such contract does not contain any provision for the exercise by the insured of an
option to receive cash payments in lieu of the payment of the annuity.
3) Amount deducted by or on behalf of the Government from the salary of a Government
employee for securing a deferred annuity or making provisions for his spouse or children. The
excess, if any, over one-fifth of the salary is to be ignored.
4) Contributions to any provident fund to which the Provident Funds Act, 1925 applies.
5) Contributions made to any Provident Fund set up by the Central Government and notified in
his behalf (i.e., the Public Provident Fund). Such contribution can be made in the name of any
persons mentioned in (1) above. The maximum limit for deposit in PPF is 1,50,000 in a year.
6) Contribution by an employee to a recognised provident fund.
7) Contribution by an employee to an approved superannuation fund
8) Subscription to any such security of the Central Government or any such deposit scheme as
the Central Government as may notify in the Official Gazette. Accordingly, Sukanya Samriddhi
Scheme has been notified to provide that any sum paid or deposited during the previous
year in the said Scheme, by an individual in the name of –
(a) The individual himself or herself;
(b) Any girl child of the individual; or
(c) Any girl child for whom such individual is the legal guardian would be eligible for
deduction under section 80C.
9) Subscription to any Savings Certificates under the Government Savings Certificates Act, 1959
notified by the Central Government in the Official Gazette (i.e. National Savings Certificate (VIII
Issue) issued under the Government Savings Certificates Act, 1959).
10) Contributions in the name of any person specified in (1) above for participation in the Unit-
linked Insurance Plan 1971.
11) Contributions in the name of any person mentioned in (1) above for participation in any Unit
linked Insurance Plan of the LIC Mutual Fund, referred to in section 10(23D) in this behalf.
12) Contributions to approved annuity plans of LIC (New Jeevan Dhara and New Jeevan Akshay,
New Jeevan Dhara I and New Jeevan Akshay I, II and III) or any other insurer (Tata AIG Easy
Retire Annuity Plan of Tata AIG Life Insurance Company Ltd.) as the Central Government may,
by notification in the Official Gazette, specify in this behalf.
13) Subscription to any units of any mutual fund referred to in section 10(23D) or from the
Administrator or the specified company under any plan formulated in accordance with such
scheme notified by the Central Government;
14) Contribution by an individual to a pension fund set up by any Mutual Fund referred to in
section 10(23D) or by the Administrator or the specified company as the Central Government
may specify (i.e., UTI-Retirement Benefit Pension Fund set up by Unit Trust of India (Transfer
of Undertaking and Repeal) Act, 2002 as a pension fund).
15) Subscription to any deposit scheme or contribution to any pension fund set up by the National
Housing Bank i.e., National Housing Bank (Tax Saving) Term Deposit Scheme, 2008.
16) Subscription to any notified deposit scheme of a public sector company, engaged in providing
long-term finance for construction, or purchase of houses in India for residential purposes or
any such deposit scheme of any authority constituted in India by or under any law enacted
either for dealing with and satisfying the need for housing accommodation or for planning,
development or improvement of cities, towns and villages or for both. The Central
Government has, vide Notification No.2/2007 dated 11.1.2007, specified the public deposit
scheme of HUDCO, subscription to which would qualify for deduction under section 80C.
17) Payment of tuition fees by an individual assessee at the time of admission or thereafter to any
university, college, school or other educational institutions within India for the purpose of full-
time education of any two children of the individual. It shall not include any payment towards
development fees or donation or payment of similar nature and payment made for education
to any institution situated outside India.
18) Any payment made towards the cost of purchase or construction of a new residential house
property. The income from such property –
(i) should be chargeable to tax under the head “Income from house property”;
(ii) Would have been chargeable to tax under the head “Income from house property”
had it not been used for the assessee’s own residence.
The approved types of payments are as follows:
(i) Any installment or part payment of the amount due under any self-financing or other
schemes of any development authority, Housing Board or other authority engaged in
the construction and sale of house property on ownership basis; or
(ii) Any installment or part payment of amount due to any company/ a cooperative society
of which assessee is a shareholder or member towards cost of house allotted to him; or
(iii) Repayment of amount borrowed by the assessee from:
a) The Central Government or any State Government;
b) Any bank including a co-operative bank;
c) The Life Insurance Corporation;
d) The National Housing Bank;
e) Any public company formed and registered in India with main object of carrying on
business of providing long-term finance for construction or purchase of houses in
India for residential purposes which is eligible for deduction under sec. 36(1)(viii);
f) Any company in which the public are substantially interested or any cooperative
society engaged in the business of financing the construction of houses;
g) The assessee’s employer, where such employer is an authority or a board or a
corporation or any other body established or constituted under Central or State Act;
h) the assessee’s employer where such employer is a public company or public sector
company or a university established by law or a college affiliated to such university
or a local authority or a co-operative society.
(iv) Stamp duty, registration fee and other expenses for the purposes of transfer of such
house property to the assessee.
Inadmissible payments: However, the following amounts do not qualify for rebate:
(i) admission fee, cost of share and initial deposit which a shareholder of a company or a
member of a co-operative society has to pay for becoming a shareholder or member; or
(ii) the cost of any addition or alteration or renovation or repair of the house property after
the completion of the house or after the house has been occupied by the assessee or
any person on his behalf or after it has been let out; or
(iii) Any expenditure in respect of which deduction is allowable under section 24.
19) Subscription to equity shares or debentures forming part of any eligible issue of capital
approved by the Board on an application made by a public company or as subscription to any
eligible issue of capital by any public financial institution in the prescribed form. Eligible issue
of capital means an issue made by a public company formed and registered in India or a public
financial institution and the entire proceeds of the issue are utilised wholly and exclusively for
the purposes of any business referred to in section 80-IA(4) i.e. industry/undertaking carrying
on infrastructure facilities or telecomm services or industrial park or power generation. A lock-
in period of three years is provided in respect of such equity shares or debentures. In case of
any sale or transfer of shares or debentures within three years of the date of acquisition, the
aggregate amount of deductions allowed in respect of such equity shares or debentures in the
previous year or years preceding the previous year in which such sale or transfer has taken
place shall be deemed to be the income of the assessee of such previous year and shall be
liable to tax in the assessment year relevant to such previous year. A person shall be treated
as having acquired any shares or debentures on the date on which his name is entered in
relation to those shares or debentures in the register of members or of debenture-holders, as
the case may be, of the public company.
20) Subscription to any units of any mutual fund referred to in section 10(23D)] and approved by
the Board on an application made by such mutual fund in the prescribed form. It is necessary
that such units should be subscribed only in the eligible issue of capital of any company.
21) Investment in term deposit.
1) for a period of not less than five years with a scheduled bank; and
2) Is in accordance with scheme framed and notified by Central Government in the Official
Gazette now qualifies as an eligible investment for availing deduction under section 80C.
The maximum limit for investment in term deposit is 1,50,000
22) Subscription to such bonds issued by NABARD (as Central Government may notify).
23) Five year time deposit in an account under Post Office Time Deposit Rules, 1981; and
24) Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004.
Termination of Insurance Policy or Unit Linked Insurance Plan or transfer of House Property or
withdrawal of deposit:
Where, in any previous year, an assessee:
(i) terminates his contract of insurance referred to in (1) above, by notice to that effect or
where the contract ceases to be in force by reason of not paying the premium, by not
reviving the contract of insurance, -
a. in case of any single premium policy, within two years after the date of commencement
of insurance; or
b. in any other case, before premiums have been paid for two years; or
(ii) terminates his participation in any Unit Linked Insurance Plan referred to in (10) or (11)
above, by notice to that effect or where he ceases to participate by reason of failure to pay
any contribution, by not reviving his participation, before contributions in respect of such
participation have been paid for five years, or
(iii) transfers house property referred to in (18) above, before expiry of five years from the end
of the financial year in which possession of such property is obtained by him, or receives
back, whether by way of refund or otherwise, any sum specified in (18) above, then, no
deduction will be allowed to the assessee in respect of sums paid during such previous year
and the total amount of deductions of income allowed in respect of the previous year or
years preceding such previous year, shall be deemed to be income of the assessee of such
previous year and shall be liable to tax in assessment year relevant to such previous year.
 Further, where any amount is withdrawn by the assessee from his account under the Senior
Citizens Savings Scheme or under the Post Office Time Deposit Rules before the expiry of a
period of 5 years from the date of its deposit, the amount so withdrawn shall be deemed to be
the income of the assessee of the previous year in which the amount is withdrawn. Accordingly,
the amount so withdrawn would be chargeable to tax in the assessment year relevant to such
previous year. The amount chargeable to tax would also include that part of the amount
withdrawn which represents interest accrued on the deposit. However, if any part of the
amount so received or withdrawn (including the amount relating to interest) has been subject to
tax in any of the earlier years, such amount shall not be taxed again.
2.2 Deduction in respect of contribution to certain pension funds [Section 80CCC]
(i) Where an assessee, being an individual, has in the previous year paid or deposited any amount
out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of
LIC of India or any other insurer for receiving pension from the fund referred to in section
10(23AAB), he shall be allowed a deduction in the computation of his total income.
(ii) For this purpose, the interest or bonus accrued or credited to the assessee’s account shall not
be reckoned as contribution.
(iii) The maximum permissible deduction is 1,50,000 (Further, the overall limit of 1,50,000
prescribed in section 80CCE will continue to be applicable i.e. the maximum permissible
deduction under sections 80C, 80CCC and 80CCD(1) put together is 1,50,000).
(iv) Where any amount standing to the credit of the assessee in a fund referred to in section
10(23AAB) in respect of which a deduction has been allowed, together with interest or bonus
accrued or credited to the assessee’s account is received by the assessee or his nominee on
account of the surrender of the annuity plan in any previous year or as pension received from
the annuity plan, such amount will be deemed to be the income of the assessee or the nominee
in that previous year in which such withdrawal is made or pension is received. It will be
chargeable to tax as income of that previous year.
(v) Where any amount paid or deposited by assessee has been taken into account for this section, a
deduction under section 80C shall not be allowed with reference to such amount.
2.3 Deduction in respect of contribution to pension scheme of Central Government [Section 80CCD]
(i) As per the “New Restructured Defined Contribution Pension System” applicable to new entrants
to Government service, it is mandatory for persons entering the service of the Central
Government on or after 1st January, 2004, to contribute ten per cent their of salary every month
towards their pension account. A matching contribution is required to be made by the
Government to the said account. The benefit of this scheme is also available to individuals
employed by any other employer as well as to self-employed individuals.
(ii) Section 80CCD provides deduction in respect of contribution made to the new pension scheme
of the Central Government,
(iii) Section 80CCD(1) provides a deduction for the amount paid or deposited by an employee in his
pension account subject to a maximum of 10% of his salary. The deduction in the case of a self-
employed individual would be restricted to 10% of his gross total income in the previous year.
(iv) New sub-section (1B) has been inserted in section 80CCD to provide for an additional
deduction of up to 50,000 in respect of the whole of the amount paid or deposited by an
individual assessee under NPS in the previous year, whether or not any deduction is allowed
under section 80CCD (1).
(v) Whereas the deduction under section 80CCD(1) is subject to the overall limit of 1.50 lakh under
section 80CCE, the deduction of up to Rs.50,000 under section 80CCD(1B) is in addition to the
overall limit of Rs. 1.50 lakh provided under section 80CCE.
 (vi) Under section 80CCD (2), contribution made by the Central Government or any other employer
in the previous year to the said account of an employee, is allowed as a deduction in
computation of the total income of the assessee.
(vii) The entire employer’s contribution would be included in the salary of the employee. However,
deduction under section 80CCD (2) would be restricted to 10% of salary.
Note: The limit of Rs. 1,50,000 under section 80CCE does not apply to employer’s contribution to
pension scheme of Central Government which is allowable as deduction under section 80CCD(2).
(viii) Further, amount standing to credit of assessee in the pension account (for which deduction has
already been claimed by him under this section) and accretions to such account, shall be taxed
as income in the year in which such amounts are received by the assessee or his nominee on -
a) closure of the account or
b) his opting out of the said scheme or
c) Receipt of pension from annuity plan purchased or taken on such closure or opting out.
(ix) However, the assessee shall be deemed not to have received any amount in the previous year if
such amount is used for purchasing an annuity plan in the same previous year.
(x) No deduction will be allowed under section 80C in respect of amounts paid or deposited by the
assessee, for which deduction has been allowed under section 80CCD (1).
2.4 Limit on deductions under sections 80C, 80CCC & 80CCD (1) [Section 80CCE]
This section restricts the aggregate amount of deduction under section 80C, 80CCC and 80CCD (1) to
1,50,000. It may be noted that the deduction of upto 50,000 under section 80CCD (1B) and employer’s
contribution to pension scheme, allowable as deduction under section 80CCD (2) in the hands of the
employee, would be outside the overall limit of 1,50,000 stipulated under section 80CCE.
2.5 Deduction in respect of investment made under an equity savings scheme [Section 80CCG]
(i) Deduction under this section would be available to new retail investor, being resident individual
with GTI of up to 12 lakh, for investment in listed equity shares or listed units of equity oriented
fund, in accordance with a notified scheme. The deduction is 50% of amount invested in such
equity shares or 25,000 whichever is lower. The maximum deduction of 25,000 is available on
investment of 50,000 in such listed equity shares. Further, deduction shall be allowed for three
consecutive assessment years, beginning with assessment year relevant to previous year in
which listed equity shares or listed units of equity oriented fund were first acquired.
(ii) If the resident individual, after having claimed such deduction, fails to comply with any of the
conditions in any previous year, e.g. He sells the shares or units within one year, then, the
deduction earlier allowed shall be deemed to be the income of the previous year in which he
fails to comply with the condition. The income shall, accordingly, be liable to tax in the
assessment year relevant to such previous year.
Rajiv Gandhi Equity Savings Scheme, 2013
The Central Government has, in exercise of the powers conferred by section 80CCG(1), notified the Rajiv
Gandhi Equity Savings Scheme, 2013. The said scheme provides for eligibility criteria, procedure for
investment, period of holding and other conditions.
S. No. Particulars Content
1. Eligibility The deduction under this scheme shall be available to a new retail investor who
complies with the conditions of the Scheme and whose gross total income for
the financial year in which the investment is made under the Scheme is less
than or equal to 12 lakh.
New Retail Investor means a resident
individual,:
(i) who has not opened a demat
 account and has not made any
transactions in the derivative
segment before –
- date of opening of a demat
account; or
- the first day of the initial year, Whichever is later
However an individual who is not the
first account holder of an existing
joint demat account shall be deemed
to have not opened a demat account
for the purposes of this Scheme;
(ii) who has opened a demat account
but has not made any transactions in
the equity segment or the derivative
segment before –
- the date he designates his existing
demat account for the purpose of
availing the benefit under the Whichever is later
Scheme; or
- the first day of the initial year.
Initial year means –
(a) the financial year in which the investor designates his demat account as Rajiv
Gandhi Equity Savings Scheme account and makes investment in the eligible
securities for availing deduction under the Scheme; or
(b) the financial year in which the investor makes investment in eligible
securities for availing deduction under the Scheme for the first time, if the
investor does not make any investment in eligible securities in the financial year
in which the account is so designated.
2. Procedure for A new retail investor shall make investments under the Scheme in the
investment following manner, namely:-
under the 1. the new retail investor may invest in one or more financial years in a block of
scheme three consecutive financial years beginning with the initial year;
2. the new retail investor may make investment in eligible securities in one or
more than one transaction during any financial year during the three
consecutive financial years beginning with the initial year in which the
deduction has to be claimed;
3. the new retail investor may make any amount of investment in the demat
account but the amount eligible for deduction under the Scheme shall not
exceed Rs. 50,000 in a financial year;
4. the new retail investor shall be eligible for the tax benefit under the Scheme
only for 3 consecutive financial years beginning with the initial year, in respect
of the investment made in each financial year;
5. if the new retail investor does not invest in any financial year following the
initial year, he may invest in the subsequent financial year, within 3 consecutive
financial years beginning with the initial year, in accordance with the Scheme;
6. the new retail investor who has claimed a deduction under section 80CCG(1)
of the Act in any assessment year shall not be allowed any deduction under the
 Scheme for the same investment for any other assessment year;
7. the new retail investor shall be permitted a grace period of 7 trading days
from end of the financial year so that the eligible securities purchased on the
last trading day of the financial year also get credited in the demat account and
such securities shall be deemed to have been acquired in financial year itself;
8. the new retail investor can make investments in securities other than eligible
securities covered under the Scheme and such investments shall not be subject
to conditions of Scheme nor shall be counted for availing benefit under Scheme;
9. The deduction claimed shall be withdrawn if the lock-in period requirements
of the investment are not complied with or any other condition of the Scheme is
contravened by the new retail investor.
3. Period of The period of holding of eligible securities invested in each financial year
holding shall be under lock-in period of three years to be counted in following manner:
Type of lock-in Meaning Condition
Fixed lock-in period Period commencing The new retail investor
from date of purchase shall hold eligible
of eligible securities in securities for fixed lock-in
relevant financial year period. He shall not be
and ending on 31st permitted to sell, pledge
March of year or hypothecate any
immediately following eligible security during
relevant financial year. fixed lock-in period.
Flexible lock-in The period of two The new retail investor
period years beginning shall be permitted to
immediately after the trade the eligible
end of the fixed lock-in securities after the
Period shall be called completion of the fixed
the flexible lock-in lock-in period subject to
period. the conditions prescribed
under the scheme. The
demat account should be
compliant for cumulative
period of minimum 270
days during each of 2
years of flexible lock-in
period. The demat
account shall be
considered as compliant
for number of days for
which value of
investment portfolio of
eligible securities (other
than those which are in
fixed lock-in) is equal to
or higher than
corresponding investment
claimed as eligible for
 deduction under section
80CCG.
4. Other (i) While making initial investments up to Rs. 50,000, the total cost of acquisition
Conditions of eligible securities shall not include brokerage charges, securities transaction
tax, stamp duty, service tax and any other tax, which may appear in the contract
note.
(ii) Where the investment of the new retail investor undergoes a change as a
result of involuntary corporate actions including demerger of companies,
amalgamation and such other actions, as may be notified by SEBI, resulting in
debit or credit of securities covered under the Scheme, the deduction claimed
by such investor shall not be affected.
(iii) In the case of voluntary corporate actions, including buy-back resulting only
in debit of securities where new retail investor has option to exercise his choice,
the same shall be considered as a sale transaction for purpose of the Scheme.
5. Consequence If the new retail investor fails to fulfill any of the provisions of the Scheme, the
of failure to deduction originally allowed to him under section 80CCG (1) for any previous
comply with year, shall be deemed to be the income of the assessee of the previous year in
the prescribed which he fails to comply with the provisions of the Scheme and shall be liable to
conditions tax for the assessment year relevant to such previous year.
6. Savings A new retail investor who has invested in accordance with Rajiv Gandhi Equity
Savings Scheme, 2012 shall continue to be governed by the provisions of that
Scheme to the extent it is not in contravention of the provisions of this Scheme
and such investor shall also be eligible for the benefit of investment made in
accordance with this Scheme for the financial years 2013-14 and 2014-15.
2.6 Deduction in respect of medical insurance premium [Section 80D]
(i) As per section 80D, in case of an individual, a deduction is allowed in respect of premium paid to
effect or keep in force an insurance on the health of self, spouse and dependent children or any
contribution made to the Central Government Health Scheme, up to a maximum of 25,000 in
aggregate. A further deduction of 25,000 is also allowed in case the premium is paid for the
health insurance taken for the health of parents. An increased deduction of 30,000 (instead of
25,000) shall be allowed in case any of the persons mentioned above is a senior citizen i.e., an
individual resident in India of the age of 60 years or more at any time during the relevant
previous year. Further, deduction would be allowed only if the payment of insurance premium is
made in any mode other than cash.
(ii) Section 80D provides that deduction to the extent of 5,000 shall be allowed in respect payment
made on account of preventive health check-up of self, spouse, dependent children or parents
made during the previous year. However, the said deduction of 5,000 is within the overall limit
of 25,000 or 30,000, as the case may be.
(iii) As a welfare measure towards very senior citizens i.e., person of the age of 80 years or more
and resident in India, who are unable to get health insurance coverage, deduction of upto
30,000 would be allowed in respect of any payment made on account of medical expenditure
in respect of a such person(s), if no payment has been made to keep in force an insurance on
the health of such person(s).
(iv) In the case of a HUF, deduction is allowed under this section in respect of premium paid to
insure the health of any member of the family. The maximum deduction available to a HUF
would be 25,000 and in case any member is a senior citizen, 30,000. Further, the amount paid
on account of medical expenditure incurred on the health of any member(s) of a family who is
 a very senior citizen would qualify for deduction subject to a maximum of 30,000 provided no
amount has been paid to effect or keep in force any insurance on the health of such person(s).
Such premium should be paid by any mode, other than cash, in the previous year out of his
income chargeable to tax. Further, the medical insurance should be in accordance with a
scheme made in this behalf by -
a. GIC of India and approved by the Central Government in this behalf; or
b. any other insurer and approved by the IRDA
2.7 Deduction in respect of maintenance incl. medical treatment of dependent disabled [Sec. 80DD]
(i) Section 80DD provides deduction to an assessee, who is a resident in India, being an individual or
HUF. Any amount incurred for the medical treatment (including nursing), training and
rehabilitation of a dependant, being a person with disability, or any amount paid or deposited
under a scheme framed in this behalf by the LIC or any other insurer or the Administrator or the
Specified Company as referred to in section 2(h) of the UTI for maintenance of a dependant, being
a person with disability, qualifies for deduction.
(ii) Deduction under this section is also available to assessees incurring maintenance and medical
expenditure on persons suffering from autism, cerebral palsy and multiple disabilities.
(iii) The quantum of deduction is 75,000 and in case of severe disability (i.e. person with 80% or more
disability) the deduction shall be 1,25,000.
(iv) ‘Dependent’ includes in the case of an individual, the spouse, children, parents, brothers and
sisters of the individual and in the case of a HUF, a member thereof, who is wholly or mainly
dependent on the assessee and has not claimed any deduction under section 80U in the
computation of his income.
(v) For claiming the deduction, the assessee shall have to furnish a copy of the certificate issued by
the medical authority under the Persons with Disability (Equal Opportunities, Protection of Rights
and Full Participation) Act, 1995 along with the return of income under section 139.
(vi) Where the condition of disability requires reassessment, a fresh certificate from the medical
authority shall have to be obtained after the expiry of the period mentioned in the original
certificate in order to continue to claim the deduction.
2.8 Deduction in respect of medical treatment etc. [Section 80DDB]
(i) This section provides deduction to an assessee, who is resident in India, being an individual and
HUF. Any amount actually paid for the medical treatment of such disease or ailment as may be
specified in the rules made in this behalf by the Board for himself or a dependent, in case the
assessee is individual or for member of a HUF, in case assessee is HUF will qualify for deduction.
(ii) The amount of deduction under this section shall be equal to the amount actually paid or
40,000, whichever is less, in respect of that previous year in which such amount was actually
paid. In case the amount is paid in respect of a senior citizen, i.e., a resident individual of the age
of 60 years or more at any time during the relevant previous year, then the deduction would be
the amount actually paid or Rs. 60,000, whichever is less. Further, a higher limit of deduction of
upto Rs. 80,000 is allowable to the assessee, for the expenditure incurred in respect of the
medical treatment of himself or a dependent, being a “very senior citizen”, who is of the age
of eighty years or more and is resident at any time during the relevant previous year.
(iii) Meaning of “Dependant”:
Assessee Dependent
( 1) Individual The spouse, children, parents, brother or sister of the individual or any of
them, wholly or mainly dependent on such individual for his support and
maintenance.
( 2) HUF Member of HUF, wholly or mainly dependent on such HUF for his support
and maintenance.
 (iv) No such deduction shall be allowed unless the assessee obtains the prescription for such
medical treatment from a neurologist, an oncologist, urologist, a hematologist, an immunologist
or such other specialist, as may be prescribed.
(v) The deduction under this section shall be reduced by the amount received, if any, under
insurance from an insurer, or reimbursed by an employer, for the medical treatment of the
assessee or the dependent.
2.9 Deduction in respect of interest on loan taken for higher education [Section 80E]
(i) Section 80E provides deduction to an individual-assessee in respect of any interest on loan paid by
him in the previous year out of his income chargeable to tax.
(ii) The loan must have been taken for the purpose of pursuing his higher education or for the
purpose of higher education of his or her relative i.e. spouse or children of the individual or the
student for whom the individual is the legal guardian.
(iii) “Higher education” means any course of study (including vocational studies) pursued after passing
the SSC or its equivalent from any school, board or university recognised by the Central or State
Government or local authority or by any other authority authorized by Central or State
Government or local authority to do so.
(iv) The loan must have been taken from any financial institution or approved charitable institution.
(v) The deduction is allowed in computing the total income in respect of the initial assessment year
(i.e. the assessment year relevant to the previous year, in which the assessee starts paying the
interest on the loan) and seven assessment years immediately succeeding the initial assessment
year or until the interest is paid in full by the assessee, whichever is earlier.
2.10 Deduction in respect of donations to certain funds, charitable institutions etc. [Section 80G]
(i) Where an assessee pays any sum as donation to eligible funds or institutions, he is entitled to a
deduction, subject to certain limitations, from the gross total income.
(ii) The following table gives the details of the institutions and funds to which donations can be
made for the purpose of claiming deduction under section 80G, the qualifying amount and the
deductions allowable –
Eligible institutions / funds Permissible deduction
1. The National Defence Fund set up by Central Govt. 100%
2. The Jawaharlal Nehru Memorial Fund. 50%
3. Prime Minister’s Drought Relief Fund. 50%
4. Prime Minister’s National Relief Fund. 100%
5. Prime Minister’s Armenia Earthquake Relief Fund. 100%
6. The Africa (Public Contributions-India) Fund. 100%
7. The National Children’s Fund. 100%
8. Indira Gandhi Memorial Trust. 50%
9. Rajiv Gandhi Foundation. 50%
10. The National Foundation for Communal Harmony. 100%
11. Approved University or educational institution of 100%
national eminence.
12. Maharashtra CM’s Earthquake Relief Fund. 100%
13. Any fund set up by State Government of Gujarat 100%
exclusively for providing relief to victims of Gujarat
earthquake.
14. Any Zilla Saksharta Samiti for primary education in 100%
villages & towns & for literacy & post-literacy activities
15. National Blood Transfusion Council or any State 100%
Blood Transfusion Council whose sole objective is the
control, supervision, regulation or encouragement of
operation and requirements of blood banks.
16. Any State Government Fund set up to provide 100%
medical relief to the poor.
17. The Army or Air Force Central Welfare Fund or 100%
Indian Naval Benevolent Fund established by armed
forces of Union for welfare of past and present
members of such forces/their dependents
18. The National Illness Assistance Fund. 100%
19. The CM’s or Lieutenant Governor’s Relief Fund 100%
20. National Sports Fund set up by Central Govt. 100%
21. National Cultural Fund set up by Central Govt. 100%
22. Fund for Technology Development and Application 100%
set up by Central Government.
23. National Trust for welfare of persons with Autism, 100%
Cerebral Palsy, Mental Retardation and Multiple
Disabilities
24. Swachh Bharat Kosh, set up by Central 100%
Government, other than sum spent by the assessee in
pursuance of CSR u/s 135(5) of Companies Act, 2013.
25. The Clean Ganga Fund, set up by Central 100%
Government, where such assessee is a resident, other
than the sum spent in pursuance of CSR u/s 135(5) of
the Companies Act, 2013.
26. The National Fund for Control of Drug Abuse 100%
constituted under section 7A of the Narcotic Drugs
and Psychotroic Substances Act, 1985

Eligible institutions / funds % of donation subject to % of Donation subject to qualifying

qualifying limit [see para (iii) below] limit (see iii below)
 27. Any Institution or Fund established in India for 50%
charitable purposes fulfilling certain prescribed
conditions under section 80G(5)
28. The Government or any local authority for 50%
utilization for any charitable purpose other than the
purpose of promoting family planning.
29. An authority constituted in India or under any 50%
other law enacted either for dealing with and
satisfying the need for housing accommodation or for
the purpose of planning, development or
improvement of cities, towns and villages, or both.
30. Any Corporation established by the Central 50%
Government or any State Government for promoting
interests of the members of a minority community.
31. Government or any approved local authority, 100%
institution or association for promotion of family
planning.
32. Notified temple, mosque, gurdwara, church or 50%
other place of historic, archaeological or artistic
importance or which is a place of public worship of
renown throughout any State or States.
33. Sum paid by a company as donation to the Indian 100%
Olympic Association or any other
association/institution established in India, as may be
notified by the Government for the development of
infrastructure for sports or games, or the sponsorship
of sports and games in India.

(iii) All the eligible donations Sl.No. 27 to 33 should be aggregated and sum total should be limited
to 10% of the adjusted gross total income. This would be the maximum permissible deduction.
The donations qualifying for 100% deduction would be first adjusted from the maximum
permissible deduction and thereafter 50% deduction of the balance would be allowed.
Adjusted gross total income means the gross total income as reduced by the following:
(1) Amount of deductions under sections 80C to 80U (but not including section 80G),
(2) Any income on which income-tax is not payable,
(3) Long term capital gains taxable under section 112 and short term capital gains taxable
under section 111A.
(iv) The conditions mentioned in item No. 27 above are as follows:
1) The institution or fund is:
a) constituted as a public charitable trust, or
b) registered under the Societies Registration Act, 1960 or under any corresponding law
or under section 25 of the Companies Act, 1956, or
c) a University established by law or
d) any other educational institution recognized by the Government or
e) An institution financed wholly or in part by the Government or a local authority.
2) Where such Institution or Fund derives any income, such income should not be liable to
inclusion in its total income under section 10(23AA), 10(23C) or 11 or 12.
The Institution, referred to in the above clauses of section 10 is as follows:
 (i) Regimental fund or Non-public Fund established by the armed forces of the Union
for the welfare of its members and their dependants [Section 10(23AA)]
(ii) The Prime Minister Fund (Promotion of Folk Art) [Section 10(23C)]
(iii) The Prime Minister Aid to Students Fund [Section 10(23C)]
(iv) National Foundation for communal harmony [Section 10(23C)]
(v) Charitable Trusts and Institutions [Sections 11 and 12].
However, it may be noted that the assessee will not lose the benefit of deduction if:
a) Subsequent to donation, any part of income of Institution has become chargeable to
tax due to non-compliance with any of provisions of section 11 or 12 or 12A.
b) As a result of the operation of section 11(1) (c), exemption under section 11 or
section 12 is denied to the institution.
3) No part of income or assets of the Institution or Fund is transferable or applicable at any
time for any purposes other than charitable purpose. Such charitable purpose however
does not include any purpose the whole or substantially the whole of which is of a
religious nature. For this section, an association or institution having as its object the
control, supervision, regulation or encouragement in India of such games or sports as the
Central Government may, by notification in the Official Gazette, specify in this behalf, shall
be deemed to be an institution established in India for a charitable purpose.
4) The Institution or Fund is not expressed to be for the benefit of any particular religious
community or caste. An institution or fund established for the benefit of women and
children or of Scheduled Castes, Backward classes or Scheduled Tribes is not however to
be treated as an institution or fund for the benefit of a religious community or caste.
5) The Institution or Fund maintains regular accounts of its receipt and expenditure.
(v) Where an assessee has claimed and has been allowed any deduction under this section in
respect of any amount of donation, the same amount will not qualify for deduction under any
other provision of the Act for the same or any other assessment year [Sub-section (5A)].
(vi) Where an institution or fund incurs expenditure of a religious nature for an amount not
exceeding 5% of its total income in that previous year, such institution or fund shall be deemed
to be a fund or institution to which the provisions of this section apply.
(vii) Donations in kind shall not qualify for deduction.
(viii) No deduction shall be allowed in respect of donation of any sum exceeding 10,000 unless such
sum is paid by any mode other than cash.
(ix) The deduction under section 80G can be claimed whether it has any nexus with the business of
the assessee or not.
(x) In respect of donations made after 31.3.1992 to any institution or fund, such institution or fund
must be approved by the Commissioner in accordance with the rules made in this behalf.
(xi) As per Circular No.2/2005 dated 12.1.2005, in cases where employees make donations to the
Prime Minister’s National Relief Fund, the Chief Minister’s Relief Fund or the Lieutenant
Governor’s Relief Fund through their respective employers, it is not possible for such funds to
issue separate certificate to every such employee in respect of donations made to such funds as
contributions made to these funds are in the form of a consolidated cheque. An employee who
makes donations towards these funds is eligible to claim deduction under section 80G. It is,
hereby, clarified that the claim in respect of such donations as indicated above will be
admissible under section 80G of the Income-tax Act, 1961 on the basis of the certificate issued
by the Drawing and Disbursing Officer (DDO)/Employer in this behalf.
2.11 Deduction in respect of rent paid [Section 80GG]
(i) This section provides for deduction in respect of rent paid.
(ii) The following conditions have to be satisfied for claiming deduction under section 80GG –
 (1) The assessee should not be receiving any HRA exempt under section 10(13A).
(2) Expenditure incurred by him on rent of any furnished or unfurnished accommodation should
exceed 10% of his total income arrived at after all deductions under Chapter VI A except
section 80GG.
(3) The accommodation should be occupied by assessee for his own residence.
(4) The assessee should fulfill such other conditions or limitations as may be prescribed, having
regard to the area or place in which such accommodation is situated and other relevant
considerations.
(5) The assessee or his spouse or his minor child or an HUF of which he is a member should not
own any accommodation at the place where he ordinarily resides or perform duties of his
office or employment or carries on his business or profession; or
(6) If the assessee owns any accommodation at any place other than that referred to above, such
accommodation should not be in the occupation of the assessee and its annual value is not
required to be determined under section 23(2)(a) or section 23(4)(a).
(7) The assessee should file a declaration in the prescribed form, confirming the details of rent
paid and fulfillment of other conditions, with the return of income.
(iii) The deduction admissible will be the least of the following:
(1) Actual rent paid minus 10% of total income of assessee before allowing deduction, or
(2) 25% of such total income (arrived at after making all deductions under Chapter VI A but before
making any deduction under this section), or
(3) Amount calculated at 2,000 p.m.
2.12 Deduction in respect of donations for scientific research and rural development [Section 80GGA]
(i) Section 80GGA grants deduction in respect of donations made for scientific research or rural
development by any assessee not having income chargeable under business or profession.
(ii) The following donations would qualify for deduction under this section -
(1) Any sum paid by the assessee in the previous year to a research association which has, as
its object, the undertaking of scientific research or to a University, college or other
institution to be used for scientific research; and
(2) Any sum paid by the assessee in the previous year to an association or institution which
has as its object the undertaking of any programme of rural development to be used for
carrying out any programme of rural development approved by the prescribed authority
for section 35CCA or to an institution or association which has as its object the training of
persons for implementing programmes of rural development. It is, however, essential that
in case of donation for scientific research, the donation must be to institution approved
under section 35(1)(ii) whereas in case of donation for rural development the institution
or association must be approved by the prescribed authority under section 35CCA(2).
(3) Any sum paid to a Research Association which has as its object the undertaking of
research in social science or statistical research, University, College or other institution to
be used for research in social science or statistical research. Such Research Association,
University, College or institution must be approved under section 35(1)(iii).
(4) Any sum paid to a public sector company or a local authority or to an association or
institution approved by the National Committee for carrying out any eligible project or
scheme. However, the assessee must furnish a certificate referred to in section 35AC from
such Public Sector Company or local authority or association or institution.
Note – It has been clarified that the deduction to which an assessee is entitled in respect
of any sum paid to a Research association, university, college or other institution or to an
association or institution for carrying out programme of rural development, or to a public
sector company, or to a local authority or to an association or institution for carrying out
 eligible project or scheme referred to in section 35AC, respectively, shall not be denied
merely on the ground that subsequent to the payment of such sum by the assessee the
approval granted or, as the case may be, the notification has been withdrawn.
(5) Any sum paid to a rural development fund set up and notified under section 35CCA.
(6) Any sum paid by assessee to National Urban Poverty Eradication Fund (NUPEF).
(iii) Restrictions on deduction:
(1) No deduction under this section would be allowed in the case of an assessee whose
gross total income includes income which is chargeable under the head “Profits and
gains of business or profession.”
(2) Where a deduction under this section is claimed and allowed for any assessment year,
deduction shall not be allowed in respect of such payment under any provision of this
Act for the same or any other assessment year.
(3) No deduction shall be allowed in respect of donation of any sum exceeding 10,000
unless such sum is paid by any mode other than cash.
2.13 Deduction in respect of contributions given by companies to political parties [Section 80GGB]
(i) This section provides for deduction of any sum contributed in the previous year by an Indian
company to any political party or an electoral trust. However, no deduction shall be allowed in
respect of any sum contributed by way of cash.
(ii) For this section, the word “contribute” has the same meaning assigned to it under section 293A of
the Companies Act, 1956, which provides that -
(a) a donation or subscription or payment given by a company to a person for carrying on any
activity which is likely to affect public support for a political party shall also be deemed to be
contribution for a political purpose;
(b) the expenditure incurred, directly or indirectly, by a company on advertisement in any
publication (in the nature of a souvenir, brochure, tract, pamphlet or the like) by or on
behalf of a political party or for its advantage shall also be deemed to be a contribution to
such political party or a contribution for a political purpose to the person publishing it.
(iii) “Political party” means political party regd. under sec. 29A of Representation of People Act, 1951.
2.14 Deduction in respect of contributions given by any person to political parties [Section 80GGC]
(i) This section provides for deduction of any sum contributed in the previous year by any person to a
political party or an electoral trust, otherwise than in cash.
(ii) However, the deduction will not be available to a local authority and an artificial juridical person,
wholly or partly funded by the Government.
(iii) “Political party” means a political party registered under section 29A of the Representation of the
People Act, 1951.

3. Deduction in respect of incomes

3.1 Deductions in respect of profits and gains from undertakings or enterprises engaged in
infrastructure development, etc. [Section 80-IA]
(i) Applicability: Section 80-IA(1) provides a 10 year tax holiday to an assessee, whose GTI includes
any profits and gains derived by an undertaking or enterprise from an eligible business i.e.,
business referred to in sub-section (4), namely :
(i) Infrastructure facility - Any enterprise carrying on the business of:
(a) developing
(b) operating and maintaining; or
(c) Developing, operating and maintaining any infrastructure facility.
Conditions: However, such enterprise must fulfill the following conditions:
 (i) It must be owned by a company registered in India or by a consortium of such
companies or by an authority or a board or a corporation or any other body
established or constituted under any Central or State Act.
(ii) It has entered into an agreement with the Central or a State Government or a local
authority or statutory body for (i) developing or (ii) operating and maintaining, or
(iii) developing, operating and maintaining a new infrastructure facility.
(iii) It starts operating and maintaining such infrastructure facility on or after 1-4-1995.
(iv) However, where an enterprise which developed such infrastructure facility transfers
it to another enterprise on or after 1-4-1999, and such transferee enterprise
operates and maintains it according to the agreement drawn up with the
Government, etc., this section will apply to the transferee enterprise for the
unexpired period of deduction (which was available to the first enterprise).
Meaning of “infrastructure facility”: For this purpose, ‘infrastructure facility’ means:
(i) a road, including toll road, a bridge or a rail system;
(ii) a highway project including housing or other activities being an integral part of the
highway project;
(iii) a water supply project, water treatment system, irrigation project, sanitation and
sewerage system or solid waste management system; and
(iv) A port, airport, inland waterway or inland port or navigational channel in the sea.
Note:
1. Structures at the ports for storage, loading and unloading etc. will be included in the
definition of port for the purpose of section 80-IA, if the concerned port authority
has issued a certificate that the said structures form part of the port.
2. Effluent treatment and conveyance system is a part of water treatment system and
would accordingly, qualify as an infrastructure facility for section 80-IA.
3. The CBDT has, vide Circular No. 4/2010 dated 18.5.2010, clarified that widening of
an existing road by constructing additional lanes as a part of a highway project by an
undertaking would be regarded as a new infrastructure facility for the purpose of
section 80-IA(4)(i). However, simply relaying of an existing road would not be
classifiable as a new infrastructure facility for this purpose.
(ii) Telecom undertakings: Any undertaking providing telecommunication services, whether
basic or cellular, including radio paging, domestic satellite service or network of trunking
(NOT), broadband network & internet service on/after 01/04/95 but on/before
31/3/05.
‘Domestic satellite’ has been defined by sub-section (12)(a) as “a satellite owned and
operated by an Indian company for providing telecommunication services.”
(iii) Industrial parks / Special Economic Zones: Any undertaking which develops, develops
and operates, or maintains and operates an industrial park or develops, or develops and
operates, or maintains and operates, a special economic zone.
Conditions:
(i) The undertaking begins to operate an industrial park or special economic zone in
accordance with the scheme framed and notified by the Central Government.
(ii) The scheme is notified by the Government for the period beginning on 1-4-1997
and ending on (i) 31-3-2011 for industrial parks and (ii) 31.3.2006 for SEZs.
Rule 18C lays down the following eligibility criteria for Industrial Parks to claim
benefit under section 80-IA (4)(iii) -
(1) The undertaking should begin to develop, develop and operate or maintain and
operate an industrial park any time during period from 1.4.2006 to 31.3.2009.
 (2) The undertaking and the Industrial Park should be notified by the Central
Government under the Industrial Park Scheme, 2008.
(3) The undertaking should continue to fulfill the conditions envisaged in the
Industrial Park Scheme, 2008.
(iii) However, where an undertaking develops an industrial park on or after 1.4.1999 or
a special economic zone on or after 1.4.2001 and transfers the operation and
maintenance to another undertaking (transferee undertaking), the deduction to the
transferee undertaking shall be available for the remaining period in the ten
consecutive assessment years, in such a manner as would have been available to the
transferor undertaking, as if the operation and maintenance were not so transferred
to the transferee undertaking.
(iv) Power undertakings: Any undertaking which
(i) Is set up in any part of India for the generation or generation and distribution of
power. However, such undertaking must begin to generate power at any time
during the period between 1.4.1993 and 31.3.2017.
(ii) Starts transmission or distribution by laying a network of new transmission or
distribution lines at any time during the period from 1.4.1999 and 31.3.2017.
However, the deduction shall be allowed only in respect of profits derived from the
laying of such network of new lines for transmission or distribution.
(iii) Undertakes substantial renovation and modernization of the existing network of
transmission or distribution lines at any time during the period beginning on
1.4.2004 and ending on 31.3.2017.
‘Substantial renovation and modernisation’ means an increase in the plant and
machinery in the network of transmission or distribution lines by at least fifty per cent of
the book value of such plant and machinery as on 1st April, 2004.
Telecom and Power undertakings should fulfill the following conditions:
(a) It is not formed by splitting up or reconstruction of a business already in existence.
However, this condition shall not apply in the case of an undertaking which is formed as
a result of reconstruction, re-establishment or revival of the business of any undertaking
which has been discontinued in any previous year due to extensive damage or
destruction of any building, machinery, plant or furniture owned by the assessee and
used for the purposes of such business. Further, the reason for damage or destruction is
due to any natural calamity or other unforeseen circumstances such as the following:
(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,
& such business is re-established/revived within 3 years from end of such previous year
(b) The undertaking should not be formed by the transfer of machinery or plant previously
used for any purpose. However, these conditions do not apply in case of transfer, either
in whole or in part, of machinery or plant previously used by a State Electricity Board.
This is irrespective of whether or not such transfer is in pursuance of the splitting up or
reconstruction of such State Electricity Board or reorganisation of the State Electricity
Board under Part XIII of the Electricity Act, 2003. Also, this condition shall not apply to
second-hand machinery/plant imported by assessee if following conditions are fulfilled:
(i) Such machinery or plant was not used in India prior to date of installation by
assessee.
 (ii) No deduction on account of depreciation was allowed to any person prior to the
date of installation by the assessee.
Further, where the total value of any plant or machinery previously used and now
transferred to the new business does not exceed 20% of the total value of the
machinery or plant used in the new business, such plant or machinery will be considered
as new for this purpose.
(v) Undertakings owned by an Indian company and set up for reconstruction or revival of
a power generating plant
(i) Clause (v) provides that the benefit under this section is available to an
undertaking owned by an Indian company and set up for reconstruction or revival
of a power generating plant.
(ii) Such Indian company should be formed before 30.11.2005 with majority equity
participation by public sector companies for enforcing the security interest of the
lenders to the company owning the power generating plant.
(iii) Such Indian company should have been notified before 31.12.2005 by the Central
Government for the purposes of this clause.
(iv) Such undertaking should begin to generate or transmit or distribute power
before 31.3.2011.
(ii) Rate of Deduction
1) Deduction available will be 100% of profits and gains derived from such business for 10
consecutive assessment years commencing at any time during periods specified in (iii).
2) However, in case of telecom undertakings covered under (2) above, the deduction will
be 100% for the first 5 assessment years and thereafter 30% for the further 5
assessment years.
(iii) Period of tax holiday/concession
1) The assessee has the option to claim deduction for any 10 consecutive assessment years
out of 15 years beginning from the year in which the undertaking or the enterprise develops
or begins to operate the eligible business.
2) The assessee may also claim deduction for 10 out of 15 years beginning from the year in
which an undertaking undertakes substantial renovation and modernization of the existing
transmission or distribution lines.
3) In case of an infrastructure facility being a public facility like –
(i) a road, including a toll road, bridge or rail system; or
(ii) a highway project including housing or other activities which are an integral part of
the highway project; or
(iii) a water supply project, water treatment system, irrigation project, sanitation and
sewerage system or solid waste management system, the assessee can claim
deduction for any 10 consecutive assessment years out of 20 years beginning from the
year of operation.
(iv) Other provisions
(1) For the purpose of computing deduction under this section, the profits and gains of the
eligible business shall be computed as if such eligible business were the only source of
income of the assessee during the relevant previous years [Sub-section (5)].
(2) Where housing or other activities are an integral part of a highway project and the profits
and gains have been calculated in accordance with the section, the profits shall not be liable
to tax if the following conditions have been fulfilled:
(a) The profit has been transferred to a special reserve account; and
 (b) The same is actually utilised for highway project excluding housing and other activities
before the expiry of 3 years following the year of transfer to the reserve account;
(c) The amount remaining unutilized shall be chargeable to tax as income of the year in
which the transfer to the reserve account took place [Sub-section (6)].
(3) The deduction shall be allowed to the industrial undertaking only if the accounts of the
industrial undertaking for the relevant previous year have been audited by a chartered
accountant and the assessee furnishes the audit report in the prescribed form, duly signed
and verified by such accountant along with his return of income [Sub-section (7)].
(4) Where any goods or services held for the purposes of the eligible business are transferred to
any other business carried on by the assessee, or vice versa, and if the consideration for
such transfer does not correspond with the market value of the goods or services then the
profits and gains of the eligible business shall be computed as if the transfer was made at
market value. However, if, in the opinion of the Assessing Officer, such computation
presents exceptional difficulties, the Assessing Officer may compute the profits on such
reasonable basis as he may deem fit [Sub-section (8)].
(5) The deductions claimed and allowed under this section shall not exceed the profits and
gains of the eligible business. Further, where deduction is claimed and allowed under this
section for any assessment year no deduction in respect of such profits will be allowed
under any other section under this chapter [Sub-section (9)].
(6) The Assessing Officer is empowered to make an adjustment while computing the profit and
gains of the eligible business on the basis of the reasonable profit that can be derived from
the transaction, in case the transaction between the assessee carrying on the eligible
business under section 80-IA and any other person is so arranged that the transaction
produces excessive profits to the eligible business [Sub-section (10)].
(7) The section empowers the Central Government to declare any class of industrial
undertaking or enterprise as not being entitled to deduction under this section. The denial
of exemption shall be with effect from such date as may be specified in the notification
issued in the Official Gazette [Sub-section (11)].
(8) In the case of any amalgamation or demerger, by virtue of which the Indian company
carrying on the eligible business is transferred to another Indian company, deduction under
this section will be available as follows:
(a) No deduction will be available to the amalgamating company or the demerged
company, as the case may be, in the year of amalgamation/demerger.
(b) The provisions of this section will apply to the amalgamated/resulting company as they
would have applied to the amalgamating/demerged company if the
amalgamation/demerger had not taken place [Sub-section (12)].
However, such transfer of benefit of deduction to the amalgamated/resulting company
would not be available in respect of any enterprise or undertaking which is transferred in a
scheme of amalgamation or demerger effected on or after 1.4.2007 [Sub-section (12A)].
(9) The deduction under section 80-IA would not be available in respect of any SEZ notified on
or after 1.4.2005 in accordance with the Industrial Park Scheme, 2002 and notified schemes
for SEZs, referred to in section 80-IA(4)(c)(iii) [Sub-section (13)].
(10)The tax holiday under section 80-IA would not be available in relation to a business referred
to in sub-section (4) which is in the nature of a works contract awarded by any person
(including the Central or State Government) and executed by the undertaking or enterprise
referred to in section 80-IA(1).
 Eligibility of deduction under section 80-IA for unexpired period, in case of an undertaking or
enterprise developing an infrastructure facility, industrial park, SEZ and transferring the same
to another enterprise or undertaking for operation and maintenance [Circular No. 10/2014
dated 06-05-2014]
Under section 80-IA, deduction is available in respect of profits & gains derived by an
undertaking or enterprise engaged in developing, operating and maintaining any infrastructure
facility, industrial park etc. The undertakings or enterprises eligible for availing deduction under
this section have been specified under Section 80-IA (4) and can broadly be classified as under:
(i) enterprise carrying on the business of developing or operating & maintaining or
developing, operating & maintaining infrastructure facilities [80-IA(4)(i)];
(ii) undertaking providing basic or cellular telecommunication services [80-IA(4)(ii)];
(iii) undertaking which develops, develops & operates or maintains & operates an industrial
park or SEZ [80-IA(4)(iii)];
(iv) undertaking set up for generation / generation & distribution of power or laying of
network / renovation or modernization of network of transmission / distribution lines
[80-IA(4)(iv)] or
(v) Set up for reconstruction or revival of power generation plant [80-IA(4)(v)].
The provisions of section 80-IA also contain the conditions to be satisfied for being eligible for
deduction. As per section 80-IA (3), undertakings mentioned in (ii) and (iv) above should not be
formed by splitting up or reconstruction of an existing business.
The proviso to clause (i) and clause (iii) of sub-section (4) of section 80-IA deal with the situation
where operation and maintenance of infrastructure facility or operation and maintenance of
industrial park / SEZ, respectively, is transferred to another enterprise in the manner provided
therein and the transferee undertaking can avail deduction for the unexpired period.
Section 80-IA (12A) provides that where the enterprise or undertaking of an Indian Company
entitled to the deduction under the said section is transferred on or after 01.04.2007 in a
scheme of amalgamation or demerger; no deduction shall be available to the amalgamated or
the resulting company. The vital factor in determining the eligibility criteria for availing
deduction u/s 80-IA would be verification of factual issues so as to ascertain whether
(a) there has been splitting up or reconstruction of a business already in existence,
(b) transfer is in accordance with proviso to clause (i) or clause (iii) of section 80-IA(4), or
(c) Transfer of an enterprise or undertaking is in a scheme of amalgamation or demerger.
The CBDT has, through this circular, clarified that if –
(i) an enterprise or undertaking develops an infrastructure facility, industrial park or special
economic zone, as the case may be; and
(ii) transfers it to another enterprise or undertaking for operation and maintenance in
accordance with proviso to clause (i) or clause (iii) of section 80-IA (4); and
(iii) this transfer is not by way of amalgamation or demerger,
(iv) The transferee shall be eligible for the deduction for the unexpired period.
The profit for the purposes of deduction in the case of transferee shall be computed in
accordance with sub-sections (5) to (10) of section 80-IA.
3.2 Deduction in respect of profits and gains by an undertaking or enterprise engaged in development
of SEZ [Section 80-IAB]
(i) Sub-section (1) provides for a deduction of 100% of profits and gains derived by an undertaking or
an enterprise from any business of developing a SEZ for 10 consecutive assessment years.
(ii) The deduction is available to an assessee, being a Developer, whose gross total income includes
any profits and gains derived by an undertaking or an enterprise from any business of developing
a SEZ, notified on or after 1st April, 2005 under the SEZ Act, 2005.
 (iii) Developer means -
(a) a person who, or
(b) A State Government which has been granted a letter of approval by the Central Government
under section 3(10) of the SEZ Act, 2005.
A developer includes –
(a) an authority and
(b) a Co-developer.
(iv) Co-developer means -
(a) a person who, or
(b) State Government which has been granted a letter of approval by the Central Government
under section 3(12) of the SEZ Act, 2005.
(v) The deduction shall be allowed only if the accounts are audited by a Chartered Accountant and
the audit report is furnished along with the return of income.
(vi) The assessee has the option of claiming the said deduction for any 10 consecutive assessment
years out of 15 years beginning from year in which SEZ has been notified by Central Government.
(vii) In a case where an undertaking, being a Developer, who develops a SEZ on or after 1.4.2005 and
transfers operation and maintenance of such SEZ to another Developer, deduction under sub-
section (1) shall be allowed to such transferee Developer for remaining period in 10 consecutive
assessment years as if operation & maintenance were not so transferred to transferee Developer.
(viii) The profits and gains from the eligible business should be computed as if such eligible business
were the only source of income of the assessee during the relevant assessment year.
(ix) Where any goods or services held for the purposes of eligible business are transferred to any
other business carried on by the assessee or, where any goods held for any other business are
transferred to the eligible business and, in either case, if the consideration for such transfer as
recorded in the accounts of the eligible business does not correspond to the market value thereof,
then the profits eligible for deduction shall be computed by adopting market value for such goods
or services. In case of exceptional difficulty in this regard, the profits shall be computed by the
Assessing Officer on a reasonable basis.
Where due to the close connection between the assessee and the other person or for any other
reason, it appears to the Assessing Officer that the profits of eligible business is increased to more
than the ordinary profits, the Assessing Officer shall compute the amount of profits on a
reasonable basis for allowing the deduction. The Assessing Officer is empowered to make an
adjustment while computing the profit and gains of the eligible business on the basis of the
reasonable profit that can be derived from the transaction, in case the transaction between the
assessee carrying on the eligible business under section 80-IAB and any other person is so
arranged that the transaction produces excessive profits to the eligible business.
(x) The deduction under this section should not exceed the profits of such eligible business of the
undertaking or the enterprise.
(xi) Further, where any amount of profits of an undertaking or enterprise is allowed as deduction
under this section, no deduction under any other provision of Chapter VI-A is allowable in respect
of such profits.
(xii) The Central Government may notify that the benefit conferred by this section shall not apply to
any class of industrial undertaking or enterprise with effect from any specified date.
Where any undertaking of an Indian company which is entitled to the deduction under this section is
transferred before the expiry of the period of deduction to another Indian company in a scheme of
amalgamation or demerger, no deduction shall be admissible to the amalgamating or demerged
company for the previous year in which the amalgamation or demerger takes place and the
amalgamated or the resulting company shall be entitled to the deduction as if the amalgamation or
demerger had not taken place.
3.3 Deductions in respect of profits and gains from certain industrial undertakings other than
infrastructure development undertakings, etc. [Section 80-IB]
(i) Applicability
This section will be applicable to assesses, whose gross total income includes any profits and
gains derived from any of the following business activities -
(1) An industrial undertaking including a small scale industrial undertaking (SSI)
(2) Any company carrying on scientific and industrial research and development
(3) An undertaking which begins commercial production or refining of mineral oil or commercial
production of natural gas in licensed blocks.
(4) An undertaking engaged in construction and development of housing projects approved by
a local authority
(5) Industrial undertaking deriving profits from the business of setting up and operating a cold
chain facility for agricultural produce.
(6) An undertaking deriving profits from the business of processing, preservation and packaging
of fruits or vegetables or meat and meat products or poultry or marine or dairy products or
from the integrated business of handling, storage and transportation of food grains.
(7) An undertaking operating and maintaining a hospital in anywhere in India, other than an
excluded area.
(ii) Conditions to be fulfilled, amount of deduction and period of deduction
The rate and period of deduction and the conditions required to be satisfied by the different
categories of businesses are given below:
(1) Industrial undertakings [Sub-sections (2), (3), (4) and (5)]
Conditions: In order to be eligible to claim deduction under section 80-IB, an industrial
undertaking must fulfill the following conditions:
(i) It is not formed by splitting up, or the reconstruction of, an existing business.
(ii) It is not formed by the transfer to a new business of any plant or machinery previously
used for any other purpose.
In order to satisfy this condition, total value of plant or machinery so transferred should
not exceed 20% of value of total plant or machinery used in new business. For purpose of
this condition, machinery or plant would not be regarded as previously used if it had been
used by any person other than assessee provided following conditions are satisfied:
(a) such plant or machinery was not used in India at any time prior to date of its
installation by assessee;
(b) the plant or machinery was imported into India from a foreign country;
(c) No deduction in respect of depreciation of such plant or machinery has been allowed
to any person at any time prior to the date of installation by the assessee.
(iii) It manufactures or produces any article or thing (except those specified in the Eleventh
Schedule) or operates a cold storage plant, in any part of India. However, in the case of an
SSI, restriction regarding goods specified in the Eleventh Schedule shall not apply.
(iv) In case of a manufacturing industrial unit, it should employ 10 or more workers (if
manufacture is carried on with the aid of power), or 20 or more workers (if manufacture is
carried on without the use of power).
Rate and period of deduction: The rate and period of deduction for different categories of
industrial undertakings are given below:
(i) Deduction for an industrial undertaking will be 25% of the profits and gains derived from
such industrial undertaking for a period of 10 consecutive assessment years starting
 with the initial assessment year, i.e. assessment year relevant to previous year in which
industrial undertaking begins to manufacture or produce articles or things. In case of a
company, deduction will be 30% and in case of cooperative society, the period of 10
consecutive years will become 12 consecutive assessment years.
(ii) However, in order to claim deduction specified, assessee must fulfill foll. conditions:
(a) It must have begun to manufacture or produce articles or things or operate plants
between 1-4-1991 and 31-3-1995, or such further period as specified by Central
Government in Official Gazette with respect to such class of industries.
(b) In case of an SSI, the period for above purpose is 1-4-1995 and 31-3-2002.
“Small-scale industrial undertaking” means an industrial undertaking which is, as on the
last day of the previous year, regarded as a small-scale industrial undertaking under
section 11B of the Industrial (Development and Regulation) Act, 1951.
(iii) In case of following categories of industrial undertakings, amount and period of
deduction will be 100% of profits and gains derived from the industrial undertaking for
the initial 5 assessment years and thereafter 25% of such profits and gains (in case of a
company, the rate is 30%):
(a) An industrial undertaking located in an industrially backward State specified in
Eighth Schedule. In this case, total period of deduction should not exceed 10
consecutive assessment years provided industrial undertaking begins manufacture
or production of articles or things or operation of cold storage plant between 1-4-
1993 and 31-3-2004. In case of co-operative society, the deduction will be available
for 12 assessment years (instead of 10), including initial assessment year
However, terminal date for setting up of industrial undertakings in Jammu and
Kashmir is 31.3.2012. A negative list has also been provided in Part C of 13 th
Schedule to specify commodities which should not be manufactured or produced by
such undertakings. The list includes Cigarettes/cigars of tobacco, manufactured
tobacco and substitutes, distilled/brewed alcoholic drinks and aerated branded
beverages and their concentrates. The Eighth Schedule specifies the following to be
industrially backward States and Union Territories:
(1) Arunachal Pradesh (2) Assam (3) Goa (4) Himachal Pradesh (5)Jammu & Kashmir
(6) Manipur (7) Meghalaya (8) Mizoram (9) Nagaland (10) Sikkim(11) Tripura (12)
Andaman and Nicobar Islands (13) Dadra and Nagar Haveli (14)Daman & Diu (15)
Lakshadweep (16) Pondicherry.
In case of notified industries in North-eastern region of India, deduction will be
100% of profits and gains for 10 consecutive assessment years. However, no such
deduction shall be allowed to any undertaking or enterprise which is eligible for
claiming benefit under section 80-IC.
“North-eastern region” means the region comprising the States of Arunachal
Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.
(b) An industrial undertaking located in such industrially backward districts of Category
A or B, as Central Government may, having regard to the prescribed guidelines,
specify in Official Gazette. In case of Category A industries, total period of deduction
is 10 consecutive assessment years (except in case of a co-operative society where it
is 12 years) provided undertaking begins manufacture or production of articles or
things or operation of cold storage plant between 1-10-1994 and 31-3-2004.
In case of Category B industries, the total period of deduction is 8 consecutive
assessment years (except in case of a co-operative society where it is 12 years)
 provided the undertaking begins manufacture or production of articles or things or
operation of cold storage plant between 1-10-1994 and 31-3-2004.
(2) Companies carrying on scientific research and development [Sub-section (8A)]
Conditions:
(i) It is registered in India.
(ii) It has the main object of scientific and industrial research and development.
(iii) It is approved by prescribed authority at any time after 31.3.2000 but before 1.4.2007.
(iv) It fulfils such other conditions as may be prescribed.
The amount of deduction shall be 100% of the profits and gains of such business.
The deduction will be available for a period of 10 consecutive assessment years starting with the
initial assessment year i.e. the assessment year relevant to the previous year in which the
company is approved by the prescribed authority.
(3) Undertakings engaged in commercial production or refining of mineral oil or commercial
production of natural gas in licensed blocks [Sub-section (9)]
Conditions: The undertaking should be engaged in commercial production or refining of mineral
oil or commercial production of natural gas in licensed blocks.
The following further conditions should be fulfilled –
(1) In case of an undertaking engaged in commercial production of mineral oil -
(i) Where such operations are carried out in the North Eastern Region, it has begun
commercial production before 1.4.1997.
(ii) Where such operations are carried out in any part of India, it begins commercial
production on or after 1.4.1997.
A sunset clause for tax holiday in respect of certain undertakings engaged in commercial
production of mineral oil has now been inserted. Accordingly, the above deduction for
commercial production of mineral oil will not be available for blocks licensed under a
contract awarded after 31.3.2011 under New Exploration Licensing Policy or in pursuance of
any law for time being in force or by Central or a State Government in any other manner.
(2) In case of an undertaking engaged in refining of mineral oil, it begins refining of mineral oil
on or after 1-10-1998 but not later than 31.3.2012.
(3) In case of undertaking engaged in commercial production of natural gas in licensed blocks
(1) blocks are licensed under the VIII Round of bidding for award of exploration contracts
("NELP-VIII") under New Exploration Licensing Policy announced by Government of India
vide Resolution No.O-19018/22/95-ONG.DO.VL, dated 10th February, 1999; or
(2) blocks are licensed under IV Round of bidding for award of exploration contracts for
Coal Bed Methane blocks
And begins commercial production of natural gas on or after 1st April, 2009.
Note – All blocks licensed under a single contract to be treated as a single “undertaking”
For claiming deduction under sub-section (9), all blocks licensed under a single contract, which
has been awarded -
(1) under the New Exploration Licencing Policy announced by the Government of India vide
Resolution No.O-19018/22/95-ONG.DO.VL, dated 10.2.1999 or
(2) in pursuance of any law for the time being in force or
(3) by Central or a State Government in any other manner
Shall be treated as a single "undertaking".
This definition of "undertaking" will be applicable both in relation to mineral oil and natural gas.
Rate and period of deduction: The deduction will be allowed at 100% of the profits and gains
from such business for 7 consecutive assessment years including the initial assessment year i.e.
the assessment year relevant to the previous year in which the undertaking commences the
commercial production or refining of mineral oil.
(4) Housing projects [Sub-section (10)]
Conditions:
(i) The undertaking has commenced or commences development and construction of the
housing project on or after 1.10.1998. The housing project should be completed within
4 years from end of financial year in which project is approved by the local authority. In
respect of projects approved by the local authority before 1.4.2004, the construction
should be completed on or before 31.3.2008. On account of the large scale widespread
downturn and the consequent slump in the housing sector, the period for completion of
housing projects to qualify for tax benefit under section 80-IB has been extended from 4
years to 5 years from the end of the financial year in which the housing project is
approved by the local authority, in case of housing projects approved on or after
1.4.2005. For this purpose, the date of approval would be date on which the building
plan is first approved by the local authority and the date of completion of the housing
project would be date on which the completion certificate is issued by such authority.
(ii) The projects must be approved before 31.3.2008 by a local authority.
(iii) The project is on a plot of land which is at least one acre.
In order to encourage reconstruction and redevelopment of slum dwellings, the
conditions that construction should be completed within 4 years and that the minimum
plot size should be one acre have been relaxed. The relaxation is in respect of housing
projects carried out in accordance with a scheme framed by the Central Government or
a State Government for reconstruction or redevelopment of existing buildings in areas
declared to be slum areas. Such a scheme should be notified by the Board in this behalf.
(iv) The residential unit has a maximum built-up area of 1000 sq.ft. (If such residential unit is
situated in Delhi or Mumbai or within 25 km from the municipal limits of these cities) or
1500 sq.ft. At any other place.
(v) The built-up area of the shops and other commercial establishments included in the
housing project should not exceed 5% of aggregate built-up area of the housing project
or 2000 sq. ft., whichever is less.
“Built-up area” has been defined to mean inner measurements of the residential unit at
the floor level, including the projections and balconies, as increased by the thickness of
the walls but not including the common areas shared with other residential units.
The above restrictions regarding built-up area of shops and other commercial
establishments have been relaxed in respect of housing projects approved on or after
1.4.2005. The permissible builtup area of shops and other commercial establishments
included in the housing project has been increased from 5% of the aggregate built-up
area or 2,000 sq. feet, whichever is lower, to 3% of the aggregate built-up area of the
housing project or 5,000 sq. ft., whichever is higher. However, these benefits are not
available in respect of a housing project approved by local authority before 01/04/05.
(vi) The undertaking which develops and builds the housing project shall not be allowed to
allot more than one residential unit in the housing project to the same person, not being
an individual. Where the person is an individual, no other residential unit in such
housing project should be allotted to any of the following persons:-
(1) the individual himself or spouse or minor children of such individual;
(2) the Hindu undivided family in which such individual is the karta
(3) Any person representing such individual, the spouse or minor children of such
individual or the Hindu undivided family in which such individual is the karta.
Rate and period of deduction: The deduction will be allowed at 100% of the profits derived
from such project in any previous year relevant to any assessment year.
Note – The main aim of the tax concession under section 80-IB (10) is to provide tax benefit to
the person undertaking the investment risk i.e. the actual developer. However, any person
undertaking pure contract risk is not entitled to the tax benefit. Accordingly, the benefit under
sub-section (10) would not be available to any undertaking which executes the housing project
as a works contract awarded by any other person (including the Central or State Government).
(5) Cold chain facilities for agricultural produce [Sub-section (11)]
Conditions:
(i) The industrial undertaking should be deriving profit from the business of setting up and
operating a cold chain facility for agricultural produce.
(ii) Undertaking must begin to operate such facility on or after 1-4-1999 but before 1-4-2004.
For the purposes of this section, “cold chain facility” means a chain of facilities for storage or
transportation of agricultural produce under scientifically controlled conditions including
refrigeration and other facilities necessary for the preservation of such produce.
Rate and period of deduction: The amount of deduction will be 100% of the profits and gains
derived from such industrial undertaking for a period of 5 consecutive assessment years
starting with the initial assessment year i.e. the assessment year relevant to the previous year in
which the industrial undertaking begins to operate the cold chain facility. Thereafter, the
deduction allowable is 25% of such profits and gains (30% in case of a company) for the next 5
assessment years. In case of a co-operative society, 10 consecutive years will become 12.
For A.Y.2016-17, only a co-operative society which has begun to operate its cold storage plant
in P.Y.2003-04 would be entitled to deduction@25%.
(6) Undertakings engaged in handling of foodgrains etc. [Sub-section (11A)]
Conditions:
(i) It should be deriving profits from business of processing, preservation and packaging of
fruits or vegetables or from integrated business of handling, storage and transportation of
foodgrains.
(ii) It should begin to operate such business on or after 1.4.2001.
(iii) The benefit of deduction under sub-section (11A) has now been extended to an
undertaking deriving profit from the business of processing, preservation and packaging of
meat or meat products or poultry or marine or dairy products, if it begins to operate such
business on or after 1.4.2009.
Rate and period of deduction: The amount of deduction shall be 100% of the profits and gains
derived from such business for 5 assessment years beginning with the initial assessment year i.e.
the assessment year relevant to the previous year in which the undertaking begins such
business. Thereafter, the deduction allowable is 25%. In the case of a company, 30%. The total
period of deduction should not exceed 10 consecutive assessment years.
(7) Undertakings operating and maintaining a hospital located anywhere in India, other than
the excluded area [Sub-section (11C)]
(i) Sub-section (11C) provides a 5 year tax holiday to hospitals set up in other than excluded
areas. Excluded area means area comprising urban agglomerations of Greater Mumbai,
Delhi, Kolkata, Chennai, Hyderabad, Bangalore and Ahmedabad, the districts of Faridabad,
Gurgaon, Ghaziabad, Gautam Budh Nagar and Gandhi Nagar and city of Secunderabad.
(ii) The hospital should be constructed and should start functioning between 1.4.08 to
31.3.2013. Further, it should have at least 100 beds for patients. For claiming this benefit,
it is necessary that the audit report signed and verified by a Chartered Accountant
 certifying that deduction has been correctly claimed should be filed along with the
company’s return of income.
(iii) The construction of the hospital should be in accordance with the regulations or bye-laws
of the local authority. The hospital shall be deemed to have been constructed on the date
on which a completion certificate in respect of such construction is issued by the local
authority concerned.
(iii) Other Provisions
(1) For the purpose of computing deduction under this section, the profits and gains of the
eligible business shall be computed as if such eligible business were the only source of
income of the assessee during the relevant previous years.
(2) The accounts of the industrial undertaking for the relevant previous year should be audited
by a CA and the assessee should furnish the audit report in the prescribed form, duly signed
and verified by such accountant along with the return of income.
(3) Where any goods held for the purposes of the eligible business are transferred to any other
business carried on by the assessee, or vice versa, and if the consideration for such transfer
does not correspond with the market value of the goods, then, the profits and gains of the
eligible business shall be computed as if the transfer was made at market value. However, if,
in the opinion of the Assessing Officer, such computation presents exceptional difficulties,
the Assessing Officer may compute the profits on such reasonable basis as he may deem fit.
(4) The deduction claimed and allowed under this section shall not exceed the profits and gains
of the eligible business. Further, where deduction is claimed and allowed under this section
for any assessment year, no deduction in respect of such profits will be allowed under any
other section under this Chapter.
(5) Where it appears to the Assessing Officer that the assessee derives more than ordinary
profits from the eligible business due to close connection between him and any other
person, or due to any other reason, the Assessing Officer may consider such profits as may
be reasonable for the purpose of computing deduction under this section. The Assessing
Officer is empowered to make an adjustment while computing the profit and gains of the
eligible business on the basis of the reasonable profit that can be derived from the
transaction, in case the transaction between the assessee carrying on the eligible business
under section 80-IB and any other person is so arranged that the transaction produces
excessive profits to the eligible business.
(6) The section empowers the Central Government to declare any class of industrial
undertaking or enterprise as not being entitled to deduction under this section. The denial
of exemption shall be with effect from such date as may be specified in the notification
issued in the Official Gazette.
(7) In the case of any amalgamation or demerger, by virtue of which the Indian company
carrying on the eligible business is transferred to another Indian company, deduction under
this section will be available as follows:
(a) No deduction will be available to the amalgamating company or the demerged
company, as the case may be, in the year of amalgamation/demerger.
(b) The provisions of this section will apply to the amalgamated/resulting company as they
would have applied to the amalgamating/demerged company, if the amalgamation/
demerger had not taken place.
3.4 Special provisions in respect of certain undertakings or enterprises in certain special category
States [Section 80-IC]
(i) This section allows tax holiday to new undertakings or existing undertakings on their substantial
expansion in the states of Himachal Pradesh, Uttaranchal, Sikkim and North- Eastern States.
 (ii) “Substantial expansion” means increase in the investment in plant and machinery by at least
50% of the book value of the plant and machinery (before taking depreciation in any year), as on
the first day of the previous year in which the substantial expansion is undertaken.
(iii) The tax holiday in the states of Himachal Pradesh and Uttaranchal will be 100% for the first five
assessment years and 25% (30% in the case of a company) for the next five assessment years.
(iv) However, tax holiday in the states of Sikkim and North-Eastern States will be 100% for ten
assessment years commencing from the initial assessment year.
(v) For the purpose of exemption, two classifications have been made and the Thirteenth Schedule
and Fourteenth Schedule have been inserted in the Income-tax Act. The said Schedules specify
the list of articles and the States for the purposes of availing deduction under this section.
(vi) The first classification is applicable to undertakings or enterprises which manufacture or
produce any article or thing, not being any article or thing specified in the 13th Schedule
(namely, tobacco, aerated beverages, pollution causing paper and paper products etc.) in any
export processing zone or integrated infrastructure development centre or industrial growth
centre or industrial estate or industrial park or software technology park or industrial areas or
theme park in these States as notified by the Board.
(vii) The second classification is applicable to those undertakings or enterprises which manufacture
or produce article or thing specified in the 14th Schedule only in these States without any
specification of the specified zone, area etc.
(viii) The period during which the undertakings in different States should begin or should have begun
to manufacture or produce are given hereunder -
Himachal Pradesh and Uttaranchal From 7.1.03 and ending before 1.4.2012
Sikkim From 23.12.02 and ending before 1.4.2007
North-Eastern States From 24.12.97 and ending before 1.4.2007
(ix) No benefit to these undertakings will be available under any of the sections in Chapter VIA in
relation to the profits and gains of such undertakings.
(x) While computing the total period of 10 years the period for which the benefit under section
80IB has already been availed, if any, shall also be included.
(xi) The other conditions such as that it should not be formed by splitting or reconstruction of a
business already in existence, or by transfer to a new business of plant and machinery previously
used for any purpose are the same as are applicable for claiming benefit under section 80IA.
(xii) Where any goods or services held for the purposes of the eligible business are transferred to any
other business carried on by the assessee, or vice versa, and if the consideration for such
transfer does not correspond with the market value of the goods or services then the profits and
gains of the eligible business shall be computed as if the transfer was made at market value.
However, if, in the opinion of the Assessing Officer, such computation presents exceptional
difficulties, Assessing Officer may compute profits on such reasonable basis as he may deem fit.
(xiii) Deductions claimed and allowed under this section shall not exceed profits and gains of eligible
business. Further, where deduction is claimed and allowed under this section for any
assessment year no deduction in respect of such profits will be allowed under any other section
under this chapter.
(xiv) The Assessing Officer is empowered to make an adjustment while computing the profit and
gains of the eligible business on the basis of the reasonable profit that can be derived from the
transaction, in case the transaction between the assessee carrying on the eligible business under
section 80-IC and any other person is so arranged that the transaction produces excessive
profits to the eligible business.
3.5 Tax holiday in respect of profits and gains from the business of hotel or business of building,
owning and operating a convention centre in NCR [Section 80-ID]
 (i) Deduction of 100% of profits and gains derived by an undertaking from the eligible business i.e.
business of hotel or business of building, owning and operating a convention centre in a specified
area, for a period of 5 consecutive assessment years beginning from year in which such hotel
starts functioning or convention centre starts operating on a commercial basis.
(ii) However, such hotel or convention centre should be constructed at any time during the period
from 1.4.2007 to 31.7.2010.
(iii) Specified area means the National Capital Territory of Delhi and the districts of Faridabad,
Gurgaon, Gautam Budh Nagar and Ghaziabad. This is to boost the construction activity in NCR in
view of the upcoming Common Wealth Games in 2010.
(iv) The benefit of this five year tax holiday has now been extended to new two, three or four star
hotels located in specified districts having a World Heritage Site. The specified districts are Agra,
Jalgaon, Aurangabad, Kancheepuram, Puri, Bharatpur, Chhatarpur, Thanjavur, Bellary, South 24
Parganas, Chamoli, Raisen, Gaya, Bhopal, Panchmahal, Kamrup, Goalpara, Nagaon, North Goa,
South Goa, Darjeeling and Nilgiri. For availing this benefit, the hotel should be constructed and
should start functioning between 1.4.08 to 31.3.2013.
(v) “Convention centre” means a building of a prescribed area comprising of convention halls to be
used for the purpose of holding conferences and seminars, being of such size and number and
having such other facilities and amenities, as may be prescribed.
Rule 18DE prescribes the following conditions to be fulfilled by a convention centre in order to be
eligible for deduction under section 80-ID:
(a) the convention centre shall have a minimum covered plinth area of 25,000 sq. mts;
(b) it shall have minimum of 3,000 seating capacity;
(c) there shall be minimum of 10 convention halls;
(d) the convention centre shall have convention halls, whether called conference halls or seminar
halls or auditorium for holding seminars and conferences;
(e) each convention hall of the convention centre shall be equipped with modern public address
system, slide and power-point projection system and LCD projector or video screening facility;
(f) the convention centre shall have a documentation centre with computers and printers,
telephone with STD or ISD facilities, e-mail, photocopy and scanning facility along with trained
operators to provide these facilities;
(g) the convention centre shall be completely centrally air-conditioned;
(h) The convention centre shall have adequate parking facility and other public convenience as
per local building regulations and should also fulfill all local building regulations in respect of
fire and safety.
In addition to the above facilities, the convention centers may have the following:
(a) An amphitheatre and landscaped open spaces for outdoor conference or seminar related
activities;
(b) Kitchen, dining facility, cafeteria or restaurant only to support events in the convention centre.
(vi) “Hotel” means hotel of two-star, three-star or four-star category as classified by Central
Government;
(vii) Such business should not be formed by the splitting up, or the reconstruction, of a business
already in existence. It should not be formed by the transfer to a new business of a building
previously used as a hotel or convention center. Further, it should not be formed by the transfer
to a new business of machinery or plant previously used for any purpose exceeding 20% of the
total value of machinery and plant used in the business.
(viii) For this purpose, any machinery or plant which was used outside India by any person other than
the assessee shall not be regarded as machinery or plant previously used for any purpose if the
following conditions are fulfilled:
 (a) such machinery or plant was not at any time used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) No deduction on account of depreciation has been allowed in respect of such machinery or
plant to any person earlier.
(ix) The profits and gains from the eligible business should be computed as if such eligible business
were the only source of income of the assessee during the relevant assessment year.
(x) Deduction under this section should not exceed profits of such eligible business of undertaking.
(xi) The deduction shall be allowed only if the accounts are audited by a Chartered Accountant, who is
also required to certify that the deduction has been correctly claimed. Further, the audit report
should be furnished along with the return of income.
(xii) Further, where any amount of profits of an undertaking or enterprise is allowed as deduction
under this section, no deduction under any other provision of Chapter VI-A or section 10AA is
allowable in respect of such profits.
(xiii) Where any goods or services held for the purposes of eligible business are transferred to any
other business carried on by the assessee or, where any goods held for any other business are
transferred to the eligible business and, in either case, if the consideration for such transfer as
recorded in the accounts of the eligible business does not correspond to the market value thereof,
then the profits eligible for deduction shall be computed by adopting market value for such goods
or services. In case of exceptional difficulty in this regard, the profits shall be computed by the
Assessing Officer on a reasonable basis.
(xiv) Similarly, where due to the close connection between the assessee and the other person or for
any other reason, it appears to the Assessing Officer that the profits of eligible business is
increased to more than the ordinary profits, the Assessing Officer shall compute the amount of
profits on a reasonable basis for allowing the deduction. The Assessing Officer is empowered to
make an adjustment while computing the profit and gains of the eligible business on the basis of
the reasonable profit that can be derived from the transaction, in case the transaction between
the assessee carrying on the eligible business under section 80-ID and any other person is so
arranged that the transaction produces excessive profits to the eligible business.
(xv) The Central Government may notify that the benefit conferred by this section shall not apply to
any class of undertaking with effect from any specified date.
3.6 Tax holiday in respect of profits and gains from eligible business of certain undertakings in North-
Eastern States [Section 80-IE]
(i) This section provides for an incentive to an undertaking which has during the period between
01/04/2007 and 01/04/2017, begun or begins, in any of the North-Eastern States (i.e., the States
of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura) -
(1) to manufacture or produce any eligible article or thing;
(2) to undertake substantial expansion to manufacture or produce any eligible article or thing;
(3) To carry on any eligible business.
(ii) Eligible article or thing means the article or thing other than the following -
(a) goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985
which pertains to tobacco and manufactured tobacco substitutes;
(b) pan masala as covered under Chapter 21 of First Schedule to Central Excise Tariff Act, 1985;
(c) plastic carry bags of less than 20 microns; and
(d) Goods falling under Chapter 27 of First Schedule to Central Excise Tariff Act, 1985 produced by
petroleum oil or gas refineries.
(iii) Substantial expansion means increase in the investment in the plant and machinery by at least
25% of the book value of plant and machinery (before taking depreciation in any year), as on the
first day of the previous year in which the substantial expansion is undertaken.
 (iv) Eligible business means the business of -
(a) hotel (not below two star category);
(b) adventure and leisure sports including ropeways;
(c) providing medical and health services in nature of nursing home with a minimum capacity of
25 beds;
(d) running an old-age home;
(e) operating vocational training institute for hotel management, catering and food craft,
entrepreneurship development, nursing and para-medical, civil aviation related training,
fashion designing and industrial training;
(f) running information technology related training centre;
(g) manufacturing of information technology hardware; and
(h) Bio-technology.
(v) Where the gross total income of an assessee includes any profits and gains derived by such an
undertaking, a deduction of 100% of the profits and gains derived from such business for 10
consecutive assessment years commencing with the initial assessment year shall be allowed in
computing the total income of the assessee. Initial assessment year means the assessment year
relevant to the previous year in which the undertaking begins to manufacture or produce articles
or things, or completes substantial expansion.
(vi) However, the following conditions have to be fulfilled by the undertaking for claiming benefit of
deduction under this section -
(1) It should not be formed by splitting up, or the reconstruction, of a business already in
existence (except in circumstances provided in section 33B)
(2) It should not be formed by transfer to a new business of machinery or plant previously used
for any purpose exceeding 20% of total value of machinery and plant used in the business.
(vii) For this purpose, any machinery or plant which was used outside India by any person other than
the assessee shall not be regarded as machinery or plant previously used for any purpose if the
following conditions are fulfilled:
(a) such machinery or plant was not at any time used in India;
(b) such machinery or plant is imported into India from any country outside India; and
(c) No deduction on account of depreciation has been allowed in respect of such machinery or
plant to any person earlier.
(viii) Where deduction has been allowed under this section in computing the total income of the
assessee, no deduction shall be allowed under any other section contained in Chapter VIA or
section 10AA in relation to the profits and gains of the undertaking.
(ix) Further, no deduction shall be allowed to any undertaking under this section, where the total
period of deduction inclusive of the period of deduction under this section, or under section 80-IC
or under the second proviso to section 80-IB (4), as the case may be, exceeds 10 assessment years.
(x) The profits and gains from the eligible business should be computed as if such eligible business
were the only source of income of the assessee during the relevant assessment year.
(xi) Deduction under this section should not exceed profits of such eligible business of undertaking.
(xii) The deduction shall be allowed only if the accounts are audited by a CA, who is also required to
certify that the deduction has been correctly claimed. Further, audit report should be furnished
along with the return of income.
(xiii) Where any goods or services held for the purposes of eligible business are transferred to any
other business carried on by the assessee or, where any goods held for any other business are
transferred to the eligible business and, in either case, if the consideration for such transfer as
recorded in the accounts of the eligible business does not correspond to the market value thereof,
then the profits eligible for deduction shall be computed by adopting market value for such goods
 or services. In case of exceptional difficulty in this regard, the profits shall be computed by the
Assessing Officer on a reasonable basis. The Assessing Officer is empowered to make an
adjustment while computing the profit and gains of the eligible business on the basis of the
reasonable profit that can be derived from the transaction, in case the transaction between the
assessee carrying on the eligible business under section 80-IE and any other person is so arranged
that the transaction produces excessive profits to the eligible business.
(xiv) Similarly, where due to the close connection between the assessee and the other person or for
any other reason, it appears to the Assessing Officer that the profits of eligible business is
increased to more than the ordinary profits, the Assessing Officer shall compute the amount of
profits on a reasonable basis for allowing the deduction.
(xv) The Central Government may notify that the benefit conferred by this section shall not apply to
any class of undertaking with effect from any specified date.
(xvi) Where any undertaking of an Indian company which is entitled to the deduction under this section
is transferred before the expiry of the period of deduction to another Indian company in a scheme
of amalgamation or demerger, no deduction shall be admissible to the amalgamating or demerged
company for the previous year in which the amalgamation or demerger takes place and the
amalgamated or the resulting company shall be entitled to the deduction as if the amalgamation
or demerger had not taken place.
3.7 Deduction in respect of profits and gains from business of collecting and processing of bio-
degradable waste [Section 80JJA]
(i) This section provides for deduction in respect of profits and gains from the business of collecting
and processing bio-degradable waste.
(ii) The deduction is allowable where the GTI of an assessee includes any profits and gains derived
from any of the following businesses -
(1) collecting and processing or treating of bio-degradable waste for generating power, or
(2) producing bio-fertilizers, bio-pesticides or other biological agents, or
(3) producing bio-gas, or
(4) Making pellets or briquettes for fuel or organic manure.
(iii) The deduction allowable under this section is an amount equal to the whole of such profits and
gains for a period of 5 consecutive assessment years beginning with the assessment year relevant
to the previous year in which the business commences.
3.8 Deduction in respect of employment of new workmen [Section 80JJAA]
(i) Section 80JJAA provides that the deduction hereunder shall be available to an assessee deriving
profits from manufacture of goods in its factory.
(ii) Where the GTI of such an assessee includes any profits and gains derived from the manufacture
of goods in a factory, it would be allowed a deduction of an amount equal to 30% of additional
wages paid to the new regular workmen employed by the assessee in such factory, in the
previous year, for 3 assessment years including the assessment year relevant to the previous
year in which such employment is provided.
(iii) Following conditions have to be fulfilled in order to be eligible for deduction under this section:
(1) The assessee’s GTI should include profits and gains from manufacture of goods in a factory.
(2) The factory should not be acquired by the assessee by way of transfer from any other
person or as a result of any business reorganisation.
(3) The assessee should furnish along with the return of income a report of a CA in the
prescribed form giving the prescribed particulars.
(4) In case of a new factory, in the first previous year, it employs more than 50 regular
workmen. Additional wages would mean the wages paid to new regular workmen in excess
of 50 workmen employed during the previous year.
 (5) In case of an existing factory, the number of regular workmen employed during the relevant
previous year should be equal to at least 110% of the regular workmen employed in such
factory as on the last day of the preceding year. If not, the additional wages would be Nil.
(iv) “Regular Workmen” does not include –
(1) a casual workman; or
(2) a workman employed through contract labour; or
(3) Any other workman employed for a period of less than 300 days during previous year.
3.9 Deduction in respect of certain income of Offshore Banking Units and International Financial
Services Centre [Section 80LA]
(i) This section is applicable to the following assessees -
(a) a scheduled bank having an Offshore Banking Unit in a SEZ; or
(b) any bank, incorporated by or under the laws of a country outside India, and having an
Offshore Banking Unit in a SEZ; or
(c) A Unit of an International Financial Services Centre (IFSC).
(ii) Deduction will be allowed on account of following income included in the GTI of such assessees -
(a) income from an Offshore Banking Unit in a SEZ; or
(b) income from business referred to in section 6(1) of the Banking Regulation Act, 1949, with -
(1) an undertaking located in a SEZ or
(2) any other undertaking which develops, develops and operates or develops, operates
and maintains a SEZ; or
(c) Income from any Unit of the IFSC from its business for which it has been approved for
setting up in such a Centre in a SEZ.
(iii) The deduction allowable from such income is -
(a) 100% of such income for 5 consecutive assessment years beginning with assessment year
relevant to the previous year in which –
(1) permission under section 23(1)(a) of Banking Regulation Act, 1949 was obtained; or
(2) the permission or registration under the SEBI Act, 1992 was obtained; or
(3) The permission or registration under any other relevant law was obtained.
(b) Thereafter, 50% of such income for the next 5 consecutive assessment years.
(iv) The following conditions have to be fulfilled for claiming deduction under this section-
(a) Report of a CA in prescribed form certifying that deduction has been correctly claimed in
accordance with this section, should be submitted along with return of income.
(b) A copy of the permission obtained under section 23(1)(a) of the Banking Regulation Act,
1949 should also be furnished along with the return of income.
3.10 Deduction in respect of income of co-operative societies [Section 80P]
(i) Under this section, certain specified income of a co-operative society would be allowed as a
deduction, provided such income is included in the GTI of the society.
(ii) The following items of income would be fully allowed as deduction -
(1) income from the business of banking or providing credit facilities to its members; or
(2) income from a cottage industry; or
(3) income from the marketing of the agricultural produce grown by its members; or
(4) income derived from the purchase of agricultural implements, seeds, livestock or other
articles intended for agriculture or for the purpose of supplying them to its members; or
(5) income from processing without aid of power, of the agricultural produce of its members; or
(6) the business income of labour co-operative societies and societies engaged in fishing and
other allied pursuits, such as catching, curing, processing, preserving, storing and marketing
of fish or the purchase of materials and equipment in connection therewith for the purpose
of supplying them to their members. However, the exemption in respect of this type of
 income will be available only in the case of those co-operative societies which, under their
rules and by-laws, restrict the voting rights to members who constitute the labour force or
who actually carry on the fishing or other allied activities, the co-operative credit societies
which provide financial assistance to the society and the State Government.
(iii) This section also provides that in case of a co-operative society being a primary society engaged in
supplying milk, oilseeds, fruits or vegetables raised by its members to a federal milk co-operative
society or the Government or a local authority or a Government company or a corporation
established by or under a Central, State or Provincial Act (being a company or corporation
engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public), the
whole of the amount of profits and gains of such business would be exempt from tax by way of
deduction from the gross total income of the co-operative society.
(iv) Further, a co-operative society which is engaged in activities other than or in addition to those
mentioned above is not liable to pay any income tax on the first 50,000 of its business income
arising from other activities. The limit is 1,00,000 in the case of consumer co-operative societies.
Thus, a co-operative society which is engaged in any business activity besides any of the business
activities mentioned in (1) to (6) of (ii) above would not be liable to pay any income tax on the
whole of its income derived from any of the activities specified and also on the first 1,00,000 or
50,000, as the case may be, of its business income from activities other than those aforesaid.
(v) Any income arising to a co-operative society by way of any interest and dividends derived from its
investments with any other co-operative society is deductible in full under this section.
(vi) Any income arising to a co-operative society by way of ‘Interest on securities’ or ‘Income from
house property’ (chargeable under section 22) is fully deductible under this section where the
gross total income of the co-operative society does not exceed Rs. 20,000 and it is not a housing
society or an urban consumer’s society or a society carrying on transport business or a society
engaged in the performance of any manufacturing operations with the aid of power. Thus, a
majority of small co-operative societies would not have to pay any income-tax.
(vii) The income derived by a co-operative society from the letting out of godowns or warehouses for
storage, processing or facilitating the marketing of commodities is fully allowable as deduction.
(viii) Further, where the co-operative society is also entitled to the deduction available under section
80-IA, the deduction under this section shall be allowed with reference to the gross total income
as reduced by the deduction allowable under section 80-IA.
(ix) The benefit under section 80P has been withdrawn in respect of all co-operative banks, other than
primary agricultural credit societies (i.e. as defined in Part V of the Banking Regulation Act, 1949)
and primary co-operative agricultural and rural development banks (i.e. societies having its area of
operation confined to a taluk and the principal object of which is to provide for long-term credit
for agricultural and rural development activities). This is for the purpose of treating co-operative
banks at par with other commercial banks, which do not enjoy similar tax benefits. The scope of
the definition of ‘income’ as given in section 2(24) has accordingly been widened to include within
its ambit, the profits and gains of any business of banking (including providing credit facilities)
carried on by a co-operative society with its members.
(x) Regional Rural Banks not eligible for deduction under section 80P: The CBDT has, through Circular
No. 6/2010 dated 20.9.2010, reiterated that Regional Rural Banks are not eligible for deduction
under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards. It has
also been clarified that the Circular No. 319 dated 11-1-1982 deeming any Regional Rural Bank to
be cooperative society stands withdrawn for application with effect from A.Y.2007-08.
(xi) This is consequent to the amendment in section 80P by the Finance Act, 2006, providing
specifically that w.e.f. 1-4-2007, the provisions of section 80P will not apply to any co- operative
 bank other than a Primary Agricultural Credit Society or a Primary Cooperative Agricultural and
Rural Development Bank. The same has been further clarified by this circular.
3.11 Deduction in respect of royalty income, etc., of authors of certain books other than text books
[Section 80QQB]
(i) Deduction up to maximum 3,00,000 is allowed to an individual resident in India in respect of
income derived as author i.e., the deduction shall be income derived as author or 3,00,000,
whichever is less.
(ii) This income may be received either by way of a lump sum consideration for the assignment or
grant of any of his interests in the copyright of any book.
(iii) Such book should be a work of literary, artistic or scientific nature, or of royalties or copyright
fees (whether receivable in lump sum or otherwise) in respect of such book.
(iv) However, this deduction shall not be available in respect of royalty income from textbook for
schools, guides, commentaries, newspapers, journals, pamphlets and other publications of
similar nature.
(v) Where an assessee claims deduction under this section, no deduction in respect of the same
income may be claimed under any other provision of the Income-tax Act, 1961.
(vi) For the purpose of calculating deduction under this section, Eligible income (before allowing
expenses attributable to such income) shall not exceed 15% of value of books sold during the
previous year. However, this condition is not applicable where the royalty or copyright fees are
receivable in lump sum in lieu of all rights of the author in the book.
(vii) For claiming the deduction, the assessee shall have to furnish a certificate in the prescribed
manner in the prescribed format, duly verified by the person responsible for making such
payment, setting forth such particulars as may be prescribed.
(viii) Where the assessee earns any income from any source outside India, he should bring such
income into India in convertible foreign exchange within six months from the end of the
previous year in which such income is earned or within such further period as the competent
authority may allow in this behalf for the purpose of claiming deduction under this section.
(ix) The competent authority shall mean RBI or such other authority as is authorised under any law
for the time being in force for regulating payments and dealings in foreign exchange.
3.12 Deduction in respect of royalty on patents [Section 80RRB]
(i) This section allows deduction to a resident individual in respect of income by way of royalty of a
patent registered on or after 1.4.03 up to an amount of 3 lakhs.
(ii) This deduction shall be available only to a resident individual who is registered as true and first
inventor in respect of an invention under Patents Act, 1970, including co-owner of the patent.
(iii) This exemption shall be restricted to the royalty income including consideration for transfer of
rights in the patent or for providing information for working or use thereof in India.
(iv) The exemption shall not be available on any consideration for sale of product manufactured
with the use of the patented process or patented article for commercial use.
(v) In respect of any such income which is earned from sources outside India, the deduction shall be
restricted to such sum as is brought to India in convertible foreign exchange within a period of 6
months or extended period as is allowed by the competent authority (Reserve Bank of India).
For claiming this deduction the assessee shall be required to furnish a certificate in the
prescribed form signed by the prescribed authority, alongwith the return of income.
(vi) No deduction in respect of such income will be allowed under any other provision of the
Income-tax Act, 1961.
(vii) Where the patent is subsequently revoked or the name of the assessee was excluded from the
patents register as patentee in respect of that patent, the deduction allowed during period shall
be deemed to have been wrongly allowed and assessment shall be rectified under section 155.
(viii) The period of 4 years for rectification shall be reckoned from the end of the previous year in
which the order of the revocation of the patent is passed.
3.13 Deduction in respect of interest on deposits in savings accounts [Section 80TTA]
(i) Section 80TTA provides that in case the gross total income of an assessee, being an individual or
a HUF, includes any income by way of an interest on deposits in a saving account (not being time
deposits, which are deposits repayable on expiry of fixed periods), deduction up to 10,000 in
aggregate shall be allowed while computing the total income of such assessee. Such deduction
shall be allowed in case the saving account is maintained with:
(1) a banking company to which the Banking Regulation Act, 1949, applies (including any bank
or banking institution referred to in section 51 of that Act);
(2) a co-operative society engaged in carrying on the business of banking (including a
cooperative land mortgage bank or a co-operative land development bank); or
(3) A post office.
(ii) However, if the aforesaid income is derived from any deposit in a savings account held by, or
on behalf of, a firm, an AOP/BOI, no deduction shall be allowed in respect of such income in
computing the total income of any partner of the firm or any member of the AOP or any
individual of the BOI.

4 Other Deductions
Deduction in the case of a person with disability [Section 80U]
(i) Section 80U harmonizes the criteria for defining disability as existing under the Income tax Rules
with the criteria prescribed under the Persons with Disability (Equal Opportunities, Protection of
Rights and Full Participation) Act, 1995.
(ii) This section is applicable to a resident individual, who, at any time during the previous year, is
certified by the medical authority to be a person with disability. A deduction of 75,000 in respect
of a person with disability and 1,25,000 in respect of a person with severe disability (having
disability over 80%) is allowable under this section.
(iii) The benefit of deduction under this section has also been extended to persons suffering from
autism, cerebral palsy and multiple disabilities.
(iv) The assessee claiming a deduction under this section shall furnish a copy of the certificate issued
by the medical authority in the form and manner, as may be prescribed, along with the return of
income under section 139, in respect of the assessment year for which the deduction is claimed.
(v) Where the condition of disability requires reassessment, a fresh certificate from the medical
authority shall have to be obtained after the expiry of the period mentioned on the original
certificate in order to continue to claim the deduction.