Income Tax 2025

Appearance

C.—Deductions in respect of certain incomes.

Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development,etc. ​

138 ​

  • (a) the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in section 80-IA of the Income-tax Act, 1961; and

  • (b) such assessee is eligible to claim a deduction from the profits and gains derived from such business for such tax year under the provisions of the said section, if the said Act had not been repealed, there shall be allowed, in computing the total income of the assessee, a deduction from the profits and gains derived from such business, subject to the conditions that—

    • (i) the amount of deduction is calculated as per the provisions of section 80-IA of the Income-tax Act,1961; and
    • (ii) the deduction under this Act shall be allowed only for such tax years, as would have been allowed under section 80-IA of the Income-tax Act,1961, as if the said Act had not been repealed. In respect of any tax year beginning on or after the 1st April, 2026, where––
Explanation

Section Summary: ​

This section allows taxpayers to claim deductions on profits and gains earned from industrial undertakings or enterprises engaged in infrastructure development, as per the provisions of Section 80-IA of the Income-tax Act, 1961. The deduction is applicable even though the Income-tax Act, 1961, has been repealed, provided the taxpayer meets the eligibility criteria under the repealed law. The deduction is allowed for specific tax years, as per the conditions outlined in Section 80-IA.

Key Changes: ​

  1. Continuity of Deductions: Despite the repeal of the Income-tax Act, 1961, this section ensures that taxpayers can still claim deductions under Section 80-IA for eligible businesses.
  2. Time-Bound Deductions: The deduction is allowed only for tax years that would have been eligible under Section 80-IA, as if the Act had not been repealed. This means the deduction is not extended beyond the original timeline specified in Section 80-IA.
  3. Post-2026 Applicability: For tax years starting on or after April 1, 2026, the deduction will only apply if the conditions of Section 80-IA are met.

Practical Implications: ​

  1. Taxpayers Engaged in Infrastructure Development: Businesses involved in infrastructure development, industrial undertakings, or other eligible activities can continue to claim deductions on their profits, provided they meet the criteria under Section 80-IA.
  2. No Extension of Benefits: Taxpayers cannot claim deductions beyond the original timeline specified in Section 80-IA. This means businesses must ensure they comply with the original conditions and timelines.
  3. Compliance with Old Provisions: Taxpayers must calculate the deduction amount as per the provisions of Section 80-IA, even though the Act has been repealed.

Critical Concepts: ​

  1. Section 80-IA: This section of the Income-tax Act, 1961, provides deductions for profits and gains from industrial undertakings, infrastructure development, and other specified businesses. It includes conditions like the commencement of operations within a specific period and maintaining separate books of accounts.
  2. Gross Total Income: This refers to the total income of the taxpayer before allowing any deductions under this section.
  3. Repealed Act: The Income-tax Act, 1961, has been repealed, but this section ensures that deductions under Section 80-IA continue to apply as if the Act were still in force.

Compliance Steps: ​

  1. Eligibility Check: Verify if the business qualifies for deductions under Section 80-IA of the Income-tax Act, 1961.
  2. Calculate Deduction: Compute the deduction amount as per the provisions of Section 80-IA.
  3. Maintain Records: Ensure proper documentation and separate books of accounts for the eligible business activities.
  4. File Returns: Claim the deduction in the income tax return for the relevant tax years, adhering to the timelines specified under Section 80-IA.

Example: ​

A company engaged in infrastructure development commenced operations in 2020 and is eligible for deductions under Section 80-IA. Under the new law, the company can continue to claim deductions for the tax years 2020-2025, as per the original timeline of Section 80-IA. However, for tax years starting on or after April 1, 2026, the company must meet the conditions of Section 80-IA to claim the deduction. If the company fails to meet these conditions, the deduction will not be allowed.