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Section 80LA: Deduction For Certain Income Of Offshore Banking Units
Section 80LA of the Income Tax Act, 1961, offers significant tax benefits to organizations operating in Special Economic Zones (SEZs), especially Offshore Banking Units (OBUs) and International Financial Services Centers. In this guide, we will learn more about section 80LA, its applicability, and eligibility.
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What is Section 80LA?
Section 80LA of the Income Tax Act provides for tax deductions for certain incomes earned by Offshore Banking Units (OBUs) and IFSCs.
What are Offshore Banking Units?
An Offshore Banking Unit (OBU) is a special branch of a bank located in a Special Economic Zone (SEZ) in India. It focuses on bringing in foreign currency deposits, encouraging overseas investments, and handling international banking transactions.
What is International Financial Service Centre?
International Financial Services Centres (IFSCs) are SEZs developed by the Indian government to promote financial services and capital market businesses. These SEZs focus on attracting global financial institutions and businesses to India.
Who are Eligible Assessee to Claim Deduction u/s 80LA?
Deduction under this section can be claimed by following assessee:
- A scheduled bank or a foreign bank having offshore banking unit in a SEZ
- The OBU must be operational and must have the necessary permissions under the Banking Regulation Act, IFSC.
- A unit of International Financial Service Centre
What is Eligible Income to Claim Tax Deduction u/s 80-LA?
The deduction will be allowed for the following incomes included in the gross total income of such assessee:
- Income from the offshore Banking Unit in a SEZ, or
- From any unit of the International Financial Service Centre
-
Income from the banking business with:
- Undertaking located in a SEZ or
- Any undertaking that develops, develops & operates, or operates and maintains a SEZ
What are the Conditions to Claim Deduction u/s 80-LA?
- Report from a Chartered Accountant in Form 10CCF should be filed along with the return.
- Return of income should be filed, and deductions should be claimed in the return.
- A copy of a permission under section 23(1)(a) of the Banking Regulation Act should be filed with the return.
What is the Amount of Deduction Available u/s 80-LA?
Particular | Amount of deduction |
---|---|
Scheduled bank/foreign bank having offshore banking unit in SEZ | First 5 year* = 100% of income |
Next 5 years = 50% of income |
*The beginning assessment year relevant to the previous year will be the year in which permission as per Banking Regulation Act or permission of SEBI or under any other law, is obtained.
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Frequently Asked Questions
Q- What is the due date to file Form 10 CCF?
There is no specific time for Form 10 CCF. This form needs to be filed along with the Income Tax Return Filing. Let’s say, for example, an assessee involved in international transaction and due date of return filing is 30th November, 2020. In this case, Form 10 CCF needs to be filed upto 30th November, 2020 along with the ITR.
Q- Whether all assessee can claim the deduction under section 80- LA?
Deduction under section 80-LA can be claimed by specified assessee like
- A scheduled bank or a foreign bank having offshore banking unit in a SEZ
- A unit of International Financial Service Centre
Q- Whether deduction under section 80-LA is a lifetime deduction?
Deduction under section 80-LA can be claimed for 10 consecutive years.