Overview of Deduction Under Section 80PA

Background of Deduction Under Section 80PA

Under Section 80PA of the Indian Income Tax Act (ITA), a deduction is granted in the form of an exemption for the income of Producer Companies. These companies must be registered under Section 465 of the Companies Act, 1956, or specified under Section 581B and registered as Producer Companies under the Companies Act, 2013, as well as those declared as Producer Companies by the Central Government. The deduction is applied to the gross total income and pertains to profits and gains derived from any industry or business aligned with the primary objectives of Producer Companies.

Deduction for Certain Income of Producer Companies

• If the gross total income of an assessee, being a Producer Company with a total turnover of less than 100 crore rupees in any prior year, includes profits and gains from an eligible business, a deduction equal to 100% of such profits and gains shall be allowed. This deduction is applicable for the computation of the assessee’s total income for assessment years beginning on or after 1st April 2019 but before April 1, 2025, subject to the provisions of this section.
• In cases where the assessee is also eligible for deductions under any other provision of this Chapter, the deduction under this section shall be calculated based on the income referred to in this section, after reducing the gross total income by the deductions allowed under such other provisions.

Explanation:

For the purposes of this section

• “Eligible business” means:
  • The marketing of agricultural produce raised by the members; or
  • The purchase of agricultural tools, seeds, livestock, or other items intended for agriculture, for supply to the members; or
  • The processing of agricultural produce of the members.
• “Member” shall have the meaning given to it in clause (d) of Section 581A of the Companies Act, 1956 (1 of 1956).
• “Producer Company” shall have the meaning given to it in clause (l) of Section 581A of the Companies Act, 1956 (1 of 1956).

Other Key Provisions of Section 80PA

• Section 80PA of the Income Tax Act, 1961, provides a 100% deduction on profits and gains derived from an eligible business by a Producer Company with a turnover of less than one hundred crore rupees in the previous year.
• This deduction is applicable for assessment years beginning on or after April 1, 2019, and before April 1, 2025.
• The term “eligible business” under Section 80PA includes activities such as farming, dairy, processing of agricultural produce, pisciculture, poultry and hatcheries, manufacturing, trading, sale, marketing, and other related activities as specified by the Central Government.
• To avail of this deduction, the Producer Company must have a total turnover of less than one hundred crore rupees in the previous year. The deduction is calculated from the gross total income of the company.
• The deduction amount is equal to 100% of the profits and gains attributable to the eligible business for the relevant previous year, applicable for assessment years from 2019 to 2025.
• All Producer Companies engaged in eligible businesses, such as farming, agricultural operations, manufacturing, sale and export of produce, trading of produce and services, income from value-added produce, and other activities specified by the Central Government, can benefit from this tax provision.
• The deduction is subject to the conditions outlined in Section 80PA. These include compliance with the rules and regulations of the Income Tax Act, 1961, such as filing returns on time, adhering to concentration limits for Producer Companies set by the Central Government, and fulfilling other specified requirements.
• Additionally, the Producer Company must provide detailed information about its business activities, nature of operations, turnover, profits, and other relevant details within the stipulated time frame to claim the deduction.
• To claim this deduction, the Producer Company must also obtain a certificate from a Chartered Accountant. This tax benefit helps reduce corporate income tax liability, thereby supporting and enhancing the business activities of Producer Companies.

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