Tax Management with reference to

Location and Nature of New Business

1.1. TAX MANAGEMENT IN LOCATION OF THE NEW BUSINESS

1. Sec. [ 10A] : Tax Holiday for newly established undertaking in Free Trade
Zone:

First 5 Years – 100 % of profits and gains is allowed as deduction

Next 2 Years : 50% of such Profit and Gains is deductible for further 2 assessment
years.

Next 3 Years : for the next three consecutive assessment years, so much of the
amount not exceeding 50% of the profit as is debited to the profit and loss
account year in respect of which the deduction is to be allowed and credited to a
reserve account (to be called the ''Special Economic Zone Re-investment
Allowance Reserve Account'') to be created and utilised for the purposes of the
business of the assessee

2. Sec. [ 80IA] : an [undertaking] which,—

(a) is set up in any part of India for the generation or generation and distribution
of power if it begins to generate power at any time during the period beginning
on the 1st day of April, 1993 and ending on the 31st day of March, 2010;

(b) starts transmission or distribution by laying a network of new transmission or

distribution lines at any time during the period beginning on the 1st day of April,
1999 and ending on the 31st day of March, 2010.

(c) undertakes substantial renovation and modernisation of the existing network

of transmission or distribution lines at any time during the period beginning on
the 1st day of April, 2004 and ending on the 31st day of March, 2010.

Deductions allowed is 100% or 30% of profits from such eligible business

3. Sec. [80IB] : Deduction in respect of Profits of Industrial

Undertaking located in backward State or District. Deduction allowed is either
100% and /or 30% for 10 years depending upon case to case.

4. Sec. [80IB(11B)] : The amount of deduction in the case of an

undertaking deriving profits from the business of operating and maintaining a
hospital in a rural area shall be 100% of the profits and gains of such business for
a period of five (5) consecutive assessment years, beginning with the initial
assessment year.

5. Sec. [ 80IC] : Profits from Industrial Undertaking located in the

specified States,. States are State of Jammu & Kashmir, Himachala Pradesh,
Uuttaranchal and North Eastern States. Deduction allowed is 100% of such profit.

6. Sec.[ 80 LA] : Where the gross total income of an assessee,— (i)

being a scheduled bank, or, any bank incorporated by or under the laws of a
country outside India; and having an Offshore Banking Unit in a Special Economic
Zone; or (ii) being a Unit of an International Financial Services Centre , there shall
be allowed a deduction from such income, of an amount equal to— 100% of
such income for five consecutive assessment years beginning with the
assessment year.

Tax Management In Nature Of The

New Business
1.2. TAX MANAGEMENT IN NATURE OF THE NEW BUSINESS

1. Sec. [ 10(1) ] : Agricultural Income– fully exempted (100%.

2. Sec. [10(23FB)] : Dividend or Long-Term Capital Gain ( LTCG)

accruing to Venture Capital or a Venture Company – 100% tax exempted.

“venture capital company” means such company—

(i) which has been granted a certificate of registration under the Securities
and Exchange Board of India Act, 1992
“venture capital fund” means such fund—

(i) operating under a trust deed registered under the provisions of the
Registration Act, 1908 or operating as a venture capital scheme made by the Unit
Trust of India established under the Unit Trust of India Act, 1963;

(ii) which has been granted a certificate of registration under the Securities
and Exchange Board of India Act, 1992 .

3. Sec. [ 33 AB) ] : Tea Development Account, Coffee Development

Account and Rubber Development Account : Where an assessee carrying on
business of growing and manufacturing tea or coffee or rubber in India has,
before the expiry of six months from the end of the previous year or before the
due date of furnishing the return of his income, whichever is earlier,—

- deposited with the National Bank any amount or amounts in an account the
assessee shall be allowed a deduction of—

(a) a sum equal to the amount or the aggregate of the amounts so deposited ;
or

(b) a sum equal to 40% [forty] per cent of the profits of such business
(computed under the head “Profits and gains of business or profession” before
making any deduction under this section),
whichever is less :

4. Sec. [ 35 D ] : Amortization of Certain Preliminary Expenses : Where

an assessee, being an Indian company or a person (other than a company) who is
resident in India, incurs, after the 31st day of March, 1970, any expenditure
specified in sub-section (2),—

(i) before the commencement of his business, or

(ii) after the commencement of his business, in connection with the extension of
his [industrial] undertaking or in connection with his setting up a
new [industrial] unit,
the assessee shall be allowed a deduction of an amount equal to
- one-tenth (1/10 th. ) of such expenditure for each of the ten successive previous
years beginning with the previous year in which the business commences or the
new [industrial] unit commences production or operation :

5. Sec. [ 35 E ] : Profits from Prospecting Certain Minerals : Where an

assessee, being an Indian company or a person (other than a company) who is
resident in India, is engaged in any operations relating to prospecting for, or
extraction or production of, any mineral and incurs, after the 31st day of March,
1970, any the assessee shall be allowed for each one of the relevant previous
years a deduction of an amount equal to one-tenth (1/10) of the amount of such
expenditure.

6. Sec. [ 35 ABB ] : Expenditure for obtaining licence to operate

telecommunication services : In respect of any expenditure, being in the
nature of capital expenditure, incurred for acquiring any right to operate
telecommunication services and for which payment has actually been made to
obtain a licence, there shall be allowed a deduction equal to the appropriate
fraction of the amount of such expenditure.

7. Sec. [ 36(1)(viii) ] : Special Reserve Created by Financial

Corporation : in respect of any special reserve created and maintained by
a specified entity, an amount not exceeding 20% of the profits derived from
eligible business computed under the head “Profits and gains of business or
profession” (before making any deduction under this clause) carried to such
reserve account:
Provided that where the aggregate of the amounts carried to such reserve
account from time to time exceeds twice the amount of the paid up share capital
and of the general reserves of the specified entity, no allowance under this clause
shall be made in respect of such excess.

8. Sec. [ 42 ] : Special provision for deductions in the case of business

for prospecting, etc., for mineral oil : For the purpose of computing the
profits or gains of any business consisting of the prospecting for or extraction or
production of mineral, there shall be made in lieu of, or in addition to, the
allowances admissible under this Act

9. Sec. [ 44BB ] : Special provision for computing profits and gains

in connection with the business of exploration, etc., of mineral oils : If an
assessee engaged in the business of providing services or facilities in connection
with, or supplying plant and machinery on hire used in the prospecting for, or
extraction or production of, mineral oils, then 10% of the aggregate of the
amounts shall be deemed to be the profits and gains of such business
chargeable to tax under the head “Profits and gains of business or profession”

10. Sec. [ 44 AD ] : Special provision for computing profits and gains

of business of civil construction, etc. : in the case of an assessee engaged in
the business of civil construction or supply of labour for civil construction, a sum
equal to 8% of the gross receipts paid or payable to the assessee in the previous
year on account of such business or, as the case may be, a sum higher than the
aforesaid sum as declared by the assessee in his return of income, shall be
deemed to be the profits and gains of such business chargeable to tax under the
head "Profits and gains of business or profession":

11. Sec. [ 44 AE ] : Special provision for computing profits and gains

of business of plying, hiring or leasing goods carriages : If an assessee
engaged in the business of plying, hiring or leasing such goods carriages and
who owns not more than 10 goods carriages and, the income of such business
chargeable to tax under the head "Profits and gains of business or profession"
shall be deemed to be the aggregate of the profits and gains, computed as
follows :
(i) An amount equal to Rs.3,500 [three thousand five hundred rupees] for
every month or part of a month for a heavy goods vehicle.
(ii) An amount equal to Rs. 3,150 ) [three thousand one hundred and fifty
rupees] for every month or part of a month for other than a heavy goods vehicle.

12. Sec. [ 44 AF ] : Special provisions for computing profits and gains

of retail business : If the assessee engaged in retail trade in any goods or
merchandise, a sum equal to 5% (five per cent ) of the total turnover shall be
deemed to be the profits and gains of such business chargeable to tax under the
head “Profits and gains of business or profession”.

13 Sec. [ 44B ] : Special provision for computing profits and gains

of shipping business in the case of non-residents. : in the case of an
assessee, being a non-resident, engaged in the business of operation of ships, a
sum equal to 7½ % (seven and a half per cent ) of the aggregate of the amounts
shall be deemed to be the profits and gains of such business chargeable to tax
under the head “Profits and gains of business or profession”.

14 Sec. [ 44 BBA ] : Special provision for computing profits and gains

of the business of operation of aircraft in the case of non-residents : in the
case of an assessee, being a non-resident, engaged in the business of operation
of aircraft, a sum equal to 5% ( five per cent ) of the aggregate of the amounts
shall be deemed to be the profits and gains of such business chargeable to tax
under the head “Profits and gains of business or profession”.

15 Sec. [ 44 BBB ] : Special provision for computing profits and gains

of foreign companies engaged in the business of civil construction, etc., in
certain turnkey power projects : in the case of an assessee, being a foreign
company, engaged in the business of civil construction or the business of
erection of plant or machinery or testing or commissioning thereof, in connection
with a turnkey power project approved by the Central Government, a sum equal
to (10%) ten per cent of the amount paid or payable (whether in or out of India)
to the said assessee or to any person on his behalf on account of such civil
construction, erection, testing or commissioning shall be deemed to be the
profits and gains of such business chargeable to tax under the head “Profits and
gains of business or profession”.

16 Sec. [ 44 D ] : Special provisions for computing income by way

of royalties, etc., in the case of foreign companies : in the case of an
assessee, being a foreign company,—

(a) the deductions admissible under the said sections in computing the income
by way of royalty or fees for technical services received shall not exceed in the
aggregate 20% (twenty per cent) of the gross amount of such royalty or fees ;

(b) no deduction in respect of any expenditure or allowance shall be allowed

under any of the said sections in computing the income by way of royalty or fees
for technical services received.

17. Sec. [ 80 IA ] : Deductions in respect of profits and gains from

industrial undertakings or enterprises engaged in infrastructure
development, etc. : Deductions allowed is 100% or 30% of profits from such
eligible business. The profits from such business shall be computed as if such
eligible business were the only source of income of the assessee .

Period of commencement of
Nature of Industry Assessee Deductions
business
100% for 10
Infrastructure
years out of
facility (new
Indian 20 years. In
undertaking; On or after 1-4-1995
Company case of Port
agreement with
out of 15
the Central Govt.)
years.
Any
undertaking
Telecommunicatio 100% for
. In case of
n (New first 5 years;
domestic 1-4-95 to 31-3-2005
undertaking: new 30% for
satellite
Plant) next 5 years.
Indian
Company
IP- 1-4-97 to 31-3-2006
. 100% for 10
Industrial Park or Any
. years out of
SEZ undertaking
SEZ- on or after 1-4-2001 to 31-3- 5 years
2006
New netword – 1-4-99 to 31-3-
2006
Power ( New 100% for 10
Any .
undertaking : New years out of
undertaking .
Plant) 15 years
Substantial renova. – 1-4-2004 to
31-3-2006.
18. Sec. [ 80-IA (2A) ] : the deduction in computing the total income
of an undertaking providing telecommunication services shall be 100% (hundred
per cent) of the profits and gains of the eligible business for the first five
assessment years commencing at any time during the periods and thereafter,
thirty per cent. of such profits and gains for further five assessment years;

19. Sec. [ 80-IB (11A) ] : The amount of deduction in a case of an

undertaking deriving profit from the business of processing preservation and
packing of fruits or vegetables or from the integrated business of handling,
storage and transportation of foodgrains, shall be 100% (hundred per cent) of
the profits and gains derived from such undertaking for five assessment years
and thereafter, 25% (twenty-five per cent) or 30% (thirty per cent. where the
assessee is a company) of the profits and gains derived from the operation of
such business in a manner that the total period of deduction does not exceed ten
consecutive assessment years.

20. Sec. [ 80 –IB (11B) ] : The amount of deduction in the case of an

undertaking deriving profits from the business of operating and maintaining a
hospital in a rural area shall be 100% (hundred per cent) of the profits and gains
of such business for a period of five consecutive assessment years, beginning
with the initial assessment year.

21. Sec. [ 80- IB (11) ] : the amount of deduction in a case of industrial

undertaking deriving profit from the business of setting up and operating a cold
chain facility for agricultural produce, shall be 100% (hundred per cent). of the
profits and gains derived from such industrial undertaking for five assessment
years beginning with the initial assessment year and thereafter, 25% (twenty-five
percent) or 30% (thirty per cent) where the assessee is a company) of the profits
and gains derived from the operation of such facility in a manner that the total
period of deduction does not exceed ten consecutive assessment years.
22. Sec. [ 80-IB (7A) ] : The amount of deduction in the case of any
multiplex theatre shall be-
50% (fifty per cent) of the profits and gains derived, from the business of
building, owning and operating a multiplex theatre, for period of five consecutive
years beginning from the initial assessment year in any place:

23. Sec. [ 80-IB (7B) ] : The amount of deduction in the case of any
convention centre shall be-
50% (fifty per cent) of the profits and gains derived, by the assessee from the
business of building, owning and operating a convention centre, for a period of
five consecutive years beginning from the initial assessment year;

24. Sec. [ 80-JJA ] : Deduction in respect of profit and gains from

business of collecting and processing of bio-degradable waste.: Where
the gross total income of an assessee includes any profits and gains derived from
the business of collecting and processing or treating of bio-degradable waste for
generating power, or producing bio-fertilizers, bio pesticides or other biological
agents or for producing bio-gas or], making pellets or briquettes for fuel or
organic manure, there shall be allowed a deduction of an amount equal to the
whole of such profits and gains for a period of five consecutive assessment years
beginning with the assessment year relevant to the previous year in which such
business commences.

25. Special Provisions under section 115A, 115AB, 115AC, 115AD, 115B,
15BB, 115BBA and 115D.