Section 80IA of the Income Tax Act: Everything You Need to Know

Section 80IA of the Income Tax Act provides some tax benefits to businesses that operate in some specified sectors. Under this section, you are allowed tax exemptions that are charged on the profits of your business for a certain time period, based on the eligibility of your business. 

In this blog, we will understand everything about Section 80IA of the Income Tax Act, including its eligibility, exemption, 80IA applicability, and available deductions under the provision for the assessment year 2025-2026. 

What is Section 80IA?

Section 80IA offers certain tax benefits to businesses that operate in infrastructure, telecommunication, power, and other specified industries. The provision under Section 80IA offers some tax deductions and exemptions, aiming to encourage businesses to keep investing in the specified sectors. The Income Tax Department provides such tax exemptions as continuous investment in these sectors helps in the economic growth of our country. 

Eligibility Criteria for Section 80IA

Your business must meet the following eligibility criteria to enjoy all the tax Section 80IA benefits: 

• Your business must be incorporated in India. 
• The business must have started operating on the 1st of April 1995 or later, but not after 1st April 2017. 
• The business must be operational in the development, operation, management, and maintenance of infrastructure projects. 
• Your business must be registered with the appropriate regulatory authority. Some of them include the Central Electricity Regulatory Commission and the Telecom Regulatory Authority of India. 

 Section 80IA Deduction 

According to Section 80IA of the Income Tax Act, 1961, only an eligible business can claim exemptions on the profits it earns. Here are a few more points to remember:

• Under Section 80IA, a deduction is provided for an undertaking whose aim is the country's infrastructure development. 
• All the eligible enterprises get the tax exemption for a certain number of assessment years. 
• The exemption is offered only if the profits are received through eligible business activities. It means any income generated through non-eligible activities will not be allowed to claim this exemption. 

The following table will elaborate on the enterprise's nature, permitted duration for the deduction, and the quantum of the permitted deduction. 

**Commencement Clause: Benefit introduction clause, this is the period from which an entity should start their work (not before this). 

**Sunset Clause: Period within which the enterprise must begin its operations. 

Note: 

1. In the case of an individual, HUF, BOI, an artificial judicial person, or an AOP (apart from a co-operative society), deduction under Section 80-IA will be provided only if he opts out of the new regime. 
2. In the case of companies and co-operative societies, deduction under Section 80IA will be available only if they pay tax under the normal provisions of the Act instead of special provisions like 115BAA/115BAB/115BAD/115BAE. 

Applicability of Section 80IA

Section 80IA applies to your businesses if they operate in the following sectors: 

• Providing telecommunication services
• Power generation, transmission, and distribution
• Industrial parks that the government notifies
• Renovating or modernising the existing power undertaking 
• Developing, operating, and maintaining an infrastructure facility. 

What are the Conditions to Claim Deductions Under Section 80IA?

The conditions to claim the deductions under Section 80IA may differ based on the industries your business operates in. Below are the conditions that each industry must fulfill:

Industrial Parks and SEZ 

• Regulatory Compliance: While operating the Industrial Parks and SEZs, the owners must operate in accordance with the rules specified by the Central Government.
• Deduction Criteria: You need to comply with the criteria outlined for deduction under Section 80TTB to claim benefits related to income tax deduction. 

Telecommunication Services 

• New Development: The telecommunication service must be newly developed and not have arisen from reconstructing or splitting up a business that already exists. 
• Eligibility: If it is developed by transferring plants or machinery from an existing organization, it will not qualify for the tax deductions provided under Section 80IA. 

Infrastructure Facilities 

• Eligibility: Must 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 is also allowed to apply for the deduction.
• Agreement: You should have formed an agreement of development with the statutory body, local authority, or government for your new infrastructure facility. 

Power Plants Reconstruction 

• Construction Period: Its construction period must be before the 30th of November, 2005.
• Government Recognition: Must be recognized by the Central Government before the 31st of December, 2005. 
• Operational Deadline: The power plant must have started generating, distributing, or supplying power before the 31st of March 2011. 

Generation or Generation and Distribution of Power 

• Power Generation: If your business involves power generation, it must have started operating at any time between 1st of April 1993, and 31st of March, 2017. 
• Transmission and Distribution: Starts transmission or distributing power by laying new transmission or distribution lines at any time during the period starting on the 1st of April 1999, and ending on the 31st of March 2017. 
• Renovation and Modernization: Takes on important renovation and modernization of the existing transmission or distribution network lines at any time during the period between the 1st of April, 2004, and the 31st of March 2017. 

What are the Limitations or Exceptions of Claiming Deductions Under Section 80IA?

A business can enjoy several significant tax benefits under Section 80IA; however, certain restrictions and exceptions may apply, which are as follows:

•  Income earned from activities other than the specified eligible projects or undertakings will not qualify for the deduction. 
• If the project or undertaking has been developed by splitting up or reconstructing an already existing business, then no deduction will be permitted. 
• The business has to meet the specific conditions to qualify for claiming the deductions. It includes filing the income tax returns on time and getting approvals from the relevant regulatory bodies. 
• Apart from certain situations, individuals, HUFs (Hindu Undivided Families), or other non-corporate entities are not eligible to claim this deduction.
• Companies that opted for the concessional tax regime under Section 115BAA or Section 115BAB are prohibited from claiming deductions under this Section. 

To Conclude 

Section 80IA provides significant tax benefits to your business if you operate in some specific sectors. Businesses must fulfill the 80IA eligibility criteria and produce the 80IA form along with their income tax return to claim the exemptions and deductions under this section. 

If you are a business operating in one of the eligible sectors and you wish to claim the deductions, connect with the team of Savetaxs right away. We have a team of experts who can provide you with end-to-end assistance, starting from verifying your eligibility to helping you claim the deductions. Our team has been assisting and solving tax-related issues of individuals for decades now. 

Our team of experts is working 24*7 across all time zones to provide you with the best-quality service that you deserve so that you can stay stress-free while we handle your paperwork. 

Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult with either a Chartered Accountant (CA) or a professional Company Secretary (CS) from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.