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Updated on: 03 Feb, 2025 07:25 PM
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Contents

To begin with, let’s understand “What is Offshore Banking Unit” and “What is International Financial Service Centre”?

Offshore Banking Unit

As per Section 2(zc) of the Special Economic Zone Act, 2005, Unit means a Unit set up by an entrepreneur in a Special Economic Zone and includes an Offshore Banking Unit.Thus, it can be said that a Offshore Banking Unit means a branch of a bank located in SEZ. The branch needs to obtain the permission under the Banking Regulation Act, 1949 [ Section 23(1)(a)].

International Financial Service Centre

As per Section 2(q) of the Special Economic Zone Act, 2005, International Financial Service Centre means a Centre which has been approved by the Central Government under Section 18(1) of the SEZ Act, 2005.

What is section 80-LA?

Tax concession under this section is provided to Offshore Banking Unit and International Financial service centre. Under this section, eligible assessee will get tax deduction on profit for specified period provided certain conditions given under this section is satisfied.

Who are eligible assessee to claim deduction u/s 80-LA?

Deduction under this section can be claimed by following assessee :
  • A scheduled bank or a foreign bank having offshore banking unit in a SEZ
  • 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 gross total income of such assessee :

  • Income from offshore Banking Unit in a SEZ, or
  • From any unit of International Financial Service Centre
  • Income from the banking business with :
    1. Undertaking located in a SEZ or
    2. Any undertaking which 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 deduction 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.

Particular Amount of deduction
International Financial Services Centre Upto A.Y. 2019-20 First 5 year = 100% of income
Next 5 years = 50% of income

The deduction can be claimed for any 10 consecutive assessment years out of 15 years beginning with year in which necessary permission obtained.
From A.Y. 2020-21 100% of income of any 10 consecutive years out of 15 years beginning with year in which necessary permission obtained.

Frequently Asked Questions (FAQs)

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.

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Kamal Murarka

Kamal Murarka
Director - Tax Research & Operations

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Kamal Murarka, a Chartered Accountant, is the Director- Tax Research & Operations at Tax2win. He has been with the company since its inception, contributing his expertise in national and international tax assignments. He is also a recognized speaker on tax-related topics, representing Tax2win at various industry forums. His deep knowledge and strategic insights have been crucial in shaping Tax2win’s approach to tax research, operations, and client solutions, driving the company’s continued success.