Section 80IA: Eligibility, Exemption, Applicability, and Deduction for AY 2024-25

Section 80IA of the Income Tax Act offers tax benefits to businesses operating in some specific sectors. Under this provision, you can exempt the tax levied on your business profits for a certain period depending on a business’s eligibility. This article will discuss the eligibility, exemption, applicability, and deduction of Section 80IA for the assessment year 2024-25.

What is Section 80IA?

Section 80IA of the Income Tax Act provides tax benefits to businesses that operate in infrastructure, power, telecommunication, and other specified sectors. This provision offers tax deductions and exemptions to encourage businesses to invest in the mentioned sectors. Investments in these sectors help our country's economic growth, thus, the Income Tax department encourages it by providing tax exemptions.

80IA Eligibility

Your business needs to meet the following criteria to be eligible for tax benefits under Section 80IA:

• Your business must be incorporated in India. Besides, you should engage in production or manufacture of goods, or the development, operation, and maintenance of infrastructure facilities.
• You need to register your business with the relevant regulatory authority. The Central Electricity Regulatory Commission and the Telecom Regulatory Authority of India are some of them.
• Your business must have commenced operating on or after 1 April 1995 but before 1 April 2017.

If a business meets these eligibility criteria, it can claim tax benefits under Section 80IA.

80IA Deduction 

Under Section 80IA, eligible businesses can claim a tax exemption on their profits. The exemption amount is 100% of profits derived from such business for 10 consecutive assessment years out of 20 years beginning from the year in which the enterprise develops or begins to operate the businesses such as Infrastructure facility of road or a bridge or a railway system or a highway project or a water supply project. For any other eligible businesses the exemption is available for 10 consecutive years out of 15 years beginning from the year in which the enterprise develops or begins to operate the businesses. 

However, this exemption is available only if profits are derived from eligible business activities. Any income generated from non-eligible activities will not qualify for the exemption.

Note: In case of Individual, HUF, AOP (other than Co-opeartive society) or BOI or an artificial juridical person, deduction under section 80-IA would be available only if he opts out of the New regime.

In case of companies and co-operative societies, deduction under section 80-IA would be available only if he they pay tax under normal provisions of the Act and not special provisions such as 115BAA/115BAB/115BAD/115BAE. 

80IA Applicability

Section 80IA applies to businesses operating in the following sectors:

• Infrastructure facilities such as roads, bridges, Rail System, highways, ports, airports, inland waterway, inland port or navigational channel in the sea, water supply projects, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system and telecommunication services
• Power generation, transmission, and distribution.
• Production and manufacturing of natural gas, crude oil, and other mineral oils.
• Industrial parks as notified by the government.

Conditions to Claim Deductions under Section 80IA

The conditions for claiming deductions under Section 80IA may vary as per the industries. Here are the conditions each industry should meet:

Infrastructure Facilities

• It should be a single Indian company, a corporation, a board, an authority, or a consortium of Indian enterprises, etc. Any other body under the State or Central Act can also apply for the deduction.
• You should have formed a development agreement with the statutory body, local authority, or government for your new infrastructure facility.
• Its operating period should be on or after 1 April 1995

Telecommunication Services

• You should not have developed a telecommunication service by reconstructing or splitting up an already existing business organisation.
• A telecommunication service developed by transferring plants or machinery from an existing organisation would not be eligible to claim tax deduction. 
• Its operating period should be on or after 1 April 1995 but on or before the 31st day of March, 2005.

Industrial Parks and SEZ

• Business owners need to follow the Central Government rules while operating the Industrial Parks and SEZs.
• You should adhere to the deduction criteria mentioned under Section 80TTB to claim income tax deduction benefits.
• Its operating period should be on or after 1 April 1997 and ending on the 31st day of March, 2006.

Reconstruction of Power Plants

• It should have acquired Central Government recognition before 31 December 2005.
• Its construction period should be before 30 November 2005.
• The power plant should have initiated generating, distributing, or transmitting power before 31 March 2011.

Generation or Generation & distribution of power

• Generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 2017;
• starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 2017
• undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017.

Final Word

Section 80IA is a beneficial provision that provides tax benefits to businesses operating in specific sectors. To claim the exemption and deduction under this provision, businesses must meet the eligibility criteria and submit the 80IA form along with their income tax return. If you're a business operating in one of the eligible sectors, be sure to take advantage of this provision to reduce your tax liability.