Last updated: March 3rd, 2020 4:01 PM

Section 80IA Deduction - Income Tax

Section 80 IA deduction of the Income Tax Act provides a tax deduction for certain Industrial Undertakings involved in Infrastructure Development. Section 80IA provides income deduction for enterprises in the business of developing, operating or maintaining the following:

• Infrastructure Facilities
• Telecommunication Services
• Industrial Parks
• Reconstruction of Power Plant
• Distribution of Natural Gas

Infrastructure Facilities

The infrastructure facilities include toll roads, bridges or rail systems and housing and other activities that are related to highway projects. Water projects like water treatment system, irrigation project, sanitation, and sewerage system or solid waste management system and travelling means including a port, airport, inland waterway or inland port or navigational channel in the sea can also avail this deduction.

Requirements

• The deduction for the infrastructure facilities is applicable to a company that is owned by an Indian company or a company that is owned by an authority, board, corporation or institution that comes under the Central or State Act.
• For a new infrastructure facility, there should be an agreement made to the Government, local authority or statutory body for developmental purposes.

Deduction Amount

100% profits and gains obtained from the businesses for a time period of 10 consecutive years out of 15 years from the date of its commencement.

Telecommunication Services

Telecommunication services include all agencies that provide telecommunication services such as basic or cellular for radio paging, domestic satellite service or network of trunking, broadband network and internet services. The time limit for this is from 1st April 1995 to 1st April 2005.

Requirements

There are two kinds of limitations for the requirements of telecommunication services.

1. It is not developed by splitting up or reconstruction of a business that has already been in use.
2. The second kind of limitation is not developed by the transfer of machinery or plant that has already been in use.

Deduction Amount

100% profits form the first 5 assessment years is permitted as a deduction and 30% for the next 5 assessment years for a total of 15 years from the year of its commencement.

Industrial Parks and SEZ

The industrial parks consist of companies that develop, maintains and operates an industrial park that is recognized by the Central Government.

Requirements

The company operates according to the rules of the Central Government. The duration for the SEZ and Industrial Parks varies. For SEZ it is from 1st April 1999 to 31st March 2006. For Industrial parks it 1st April 1999 to 31st March 2011.

Deduction Amount

100% profits and gains obtained from the businesses for a period of 10 consecutive years out of 15 years from the date of its commencement.

Generation and Distribution of Power

A Power Plant established in India for generation and distribution of power for a duration from 1st April 1999 to 31st March 2011. The power plant offers restoration and improvement of the network for the duration of 1st April 2004 to 31st March 2011. By offering this, there is a 50% increase in the plant and machinery till 1st April 2004.

Requirements

There are two kinds of limitations for the requirements of telecommunication services.

1. It is not developed by splitting up or reconstruction of a business that has already been in use.
2. It is not developed by the transfer of machinery or plant that has already been in use.

Deduction Amount

100% of profits form the first 5 assessment years is permitted as a deduction. 30% for the next 5 assessment years for a total of 15 years from the year of its commencement.

Reconstruction of Power Plant

According to Section 80IA, the reconstruction of a power plant should be carried out to initiate the revival of a power generating plant that is owned by an Indian company.

Requirements

The Power Plant should have been developed before 30th November 2005. It should have been recognized by the Central Government before 31st December 2005. It should start to generate, transmit or distribute power before 31st March 2011.

Deduction Allowed

100% profits and gains obtained from the businesses for a period of 10 consecutive years out of 15 years from the date of its commencement.

Distribution of Natural Gas

The distribution of natural gas is initiated by laying pipelines to distribute the gas across the country.

Requirements

There are five limitations that are applicable as follows:

1. Business is not developed by splitting up or reconstruction of a business that has already been in use.
2. Business is not developed by the transfer of machinery or plant that has already been in use.
3. It should be recognized by the Petroleum and Natural Gas Regulatory Board. An Indian company should maintain the company.
4. 1/3 of the pipeline capacity should be ready to be used for common carrier basis by any common man.
5. It should have started functioning on or after 1st April 2007.

Deduction Allowed

Section 80IA allows a deduction of 100% of profits obtained from the businesses for a time period of 10 consecutive years out of 15 years from the date of its commencement. To know how you can file your Income Tax Returns using the return-filing utility offered by Indiafilings, click here.