What is Section 80ID?
Section 80-ID of the Income Tax Act was brought in during the assessment year 2008-09 to promote development of the hospitality and convention industry. These deductions would be used to stimulate development in respective areas by offering monetary benefits to such businesses. A tax deduction can be claimed under this section by taxpayers engaged in:
- Hotel Business: Particularly for hotels located in notified or specified areas, so that they can claim tax deductions.
- Convention Centre Business: This is for taxpayers who construct, own, and manage convention centers in demarcated regions so that they can enjoy similar tax allowances.
What is Covered under the Definition of Hotel as per section 80-ID?
Hotel means Hotel of two-star, three-star or four-star category as classified by the Central Government.
What is Covered under the Definition of Convention Centre as per section 80ID?
Convention centre means a building of a prescribed area comprising of convention halls to be used for the purpose of holding conferences and seminars. These convention halls must meet the criteria of size, number, amenities, and facilities as is prescribed by the Income Tax Act
Which are the Areas Covered under Section 80-ID?
| S.No. |
Type of hotel/ source of income |
Specified Area |
| 1. |
2/3/4 star hotel or convention centre |
National capital territory of Delhi, Faridabad, Gurgaon, Gautam Budh Nagar, and Ghaziabad |
| 2. |
2/3/4 star hotel at a world heritage site |
Districts of Agra, Jalgaon, Aurangabad, Kancheepuram, Puri, Bharatpur, Chhatarpur, Thanjavur, Bellary, South 24 Parganas (excluding areas falling within the Kolkata Urban Agglomeration), Chamoli, Raisen, Gaya, Bhopal, Panchmahal, Kamrup, Goalpara, Nagaon, North Goa, South Goa, Darjeeling and Nilgiri |
What are the Conditions to Claim Deduction u/s 80ID?
Here are the conditions that must be met in order to claim this deduction under section 80ID -
1. New Enterprise: It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction of 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:-
- Flood, typhoon, hurricane, cyclone, earthquake, or other natural calamity, or
- Riot or civil disturbance, or
- Accidental fire or explosion, or
- Enemy action or action taken in combat
2. New plants & Machineries: It should not be formed by transferring old plant & machinery which was previously used for any purpose.
Exception:
- Value of old plant & machinery is allowed upto 20% of the total value of plant & machinery.
-
Second-hand imported machine will also be treated as a new plant & machine under this section, provided:
- Such plant or machinery was not used in India prior to installation.
- Plant or machinery is imported in India.
- Deduction of depreciation on such plant or machinery has not been claimed before.
Period of commencement:
| Type of hotel/ source of income |
Construction |
Applicable from assessment year |
| 2/3/4 star hotel |
Constructed & started functioning during 01 April, 2007 and 31 July, 2010 |
Assessment year 2008-09 onwards |
| 2/3/4 star hotel at a world heritage site |
Constructed & started functioning during 01 April, 2008 and 31 July, 2013 |
Assessment year 2009-10 onwards |
| Convention centre |
Constructed during 01 April, 2007 and 31 July, 2010 |
Assessment year 2008-09 onwards |
4. Audit Report: This deduction is allowed if the accounts of the assessee have been audited by a CA and an audit report has been submitted. Audit report needs to be submitted in Form No. 10CCBBA
5. Income Tax Return:- One of the conditions given in this section is that the assessee needs to file their Income Tax Return and should also claim the amount of deduction in return. Moreover, the income tax return needs to be filed on time as per section 139(1). You cannot claim a deduction in case of a belated return.
6. While computing the total income of assessee, no deduction shall be allowed under any other section contained in Chapter VIA or section 10AA.
What is the Amount of Deduction Available u/s 80ID?
100% of the profit is allowed as a deduction for 5 consecutive Assessment Years from the Initial Assessment Year
Initial Assessment Year here means the assessment year relevant to the previous year in which the business of the hotel starts functioning, or the convention centre
How to Determine Your Tax Liability?
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