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Deduction under section 80-IC : Tax subsidy for enterprises in Himachal Pradesh, Sikkim, Uttaranchal and North - Eastern states
For the purpose to set up more industries for overall development of some less developed states in India, this section came into the picture. The major objective of providing tax holiday to specified states is to promote and encourage industrial development in those states.
Deduction under this section is available to undertakings established in specified states. Under this section, eligible assessee will get tax deduction on profits under business head for specified period of time.In this blog, we will discuss the list of states covered who are eligible to claim deduction, conditions and amount of deduction etc. This section was inserted from the assessment year 2004-05.
S.No. | Name of state |
---|---|
1. | Sikkim |
2. | Himachal Pradesh |
3. | Uttranchal |
4. | North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura ) |
New Enterprise : It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or a business already in existence.
Exception : Any undertaking discontinued due to extensive damage or destruction(any building, machinery, plant or furniture owned and used for such business) due to any natural calamity or other unforeseen circumstances such as:-
Name of state | Time limit |
---|---|
Sikkim | 23 December, 2002 - 31 March, 2007 |
Himachal Pradesh or Uttaranchal | 07 January 2003 - 31 March, 2012 |
North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) | 24 December, 1997 - 31 March, 2007 |
** Substantial expansion here means :
Amount of investment in Plant & Machinery for expansion _______________________________________________ Book value of plant & machinery as on the 1st day of PY in which substantial expansion is taken
If the proportion of investment comes 50% or more, then it’s substantial expansion.
Example : Given below is data : A ltd completed 1 expansion in two year. Proportion of amount of investment to book values of plant and machineries 51% (calculated as per the formula given above) B ltd completed 2 expansion in two years. Proportion of amount of investment to book values of plant and machineries for first year is 28% and for second year is 23% which is in total 51%
In the above example, expansion by A Ltd will be termed as substantial expansion to claim deduction under this section because one expansion is completed in two years. However, in the case of B Ltd, two expansion was made in two years and both of the expansions will not qualify as substantial expansion as individually expansion is less than 50%.
State | Article to be produced by undertaking in the Industrial Zone** | Article to be produced by undertaking in any area |
---|---|---|
Sikkim | Any article but other than those given in the thirteenth schedule (Part A) | Any article given in Fourteenth Schedule (Part B) |
Himachal Pradesh or Uttaranchal | Any article but other than those given in the thirteenth schedule (Part B) | Any article given in Fourteenth Schedule (Part C) |
North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) | Any article but other than those given in the thirteenth schedule | Any article given in Fourteenth Schedule (Part A) |
State | Amount of deduction |
---|---|
Sikkim or North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) | 100% of profit for 10 years commencing from the initial assessment year** |
Himachal Pradesh or Uttaranchal | First 5 year :100% of profit commencing from the initial assessment year Next 5 year : 25% (30% in case of the company) of profit |
** Initial Assessment Year :In which undertaking starts to manufacture or produce articles or things or commence operation or completes substantial expansion.
No deduction shall be allowed in excess of 10 years to any enterprise or undertaking.
Book value of plant or machinery to be taken before depreciation.
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