Section 80LA: Deduction For Certain Income Of Offshore Banking Units

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.

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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.

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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.

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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

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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

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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.

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What is the Amount of Deduction Available u/s 80-LA?

*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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