Section 80-IC : Deductions For Certain Undertakings in Special States

Deduction under section 80-IC : Tax subsidy for enterprises in Himachal Pradesh, Sikkim, Uttaranchal and North - Eastern states
For the purpose to set up more industries for overall development of some less developed states in India, this section came into the picture. The major objective of providing tax holiday to specified states is to promote and encourage industrial development in those states.

Contents

What is section 80-IC?

Deduction under this section is available to undertakings established in specified states. Under this section, eligible assessee will get tax deduction on profits under business head for specified period of time.In this blog, we will discuss the list of states covered who are eligible to claim deduction, conditions and amount of deduction etc. This section was inserted from the assessment year 2004-05.

Which are the states covered under section 80-IC?

S.No. Name of state
1. Sikkim
2. Himachal Pradesh
3. Uttranchal
4. North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura )

What are the conditions to claim deduction u/s 80-IC ?

  1. New Enterprise : It should be a new undertaking. The undertaking should not be formed by splitting up or reconstruction or 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:-
    1. Flood, typhoon, hurricane, cyclone, earthquake or other natural calamity, or
    2. Riot or civil disturbance, or
    3. Accidental fire or explosion, or
    4. Enemy action or action taken in combat
    1. Value of old plant & machineries is allowed upto 20% of the total value of plant & machineries.
    2. Second hand imported machine will also be treated as new plant & machine under this section provided :
      1. Such plant or machinery was not used in India prior to installation for this purpose.
      2. Plant or machinery is imported in India.
      3. Deduction of depreciation on such plant or machinery will not be allowed for prior period of installation.
      Name of state Time limit
      Sikkim 23 December, 2002 - 31 March, 2007
      Himachal Pradesh or Uttaranchal 07 January 2003 - 31 March, 2012
      North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) 24 December, 1997 - 31 March, 2007
      ** Substantial expansion here means : 
      Amount of investment in Plant & Machinery for expansion _______________________________________________ Book value of plant & machinery as on the 1st day of PY in which substantial expansion is taken
      State Article to be produced by undertaking in the Industrial Zone** Article to be produced by undertaking in any area
      Sikkim Any article but other than those given in the thirteenth schedule (Part A) Any article given in Fourteenth Schedule (Part B)
      Himachal Pradesh or Uttaranchal Any article but other than those given in the thirteenth schedule (Part B) Any article given in Fourteenth Schedule (Part C)
      North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) Any article but other than those given in the thirteenth schedule Any article given in Fourteenth Schedule (Part A)
      1. Export processing Zone
      2. Integrated Infrastructure Development Centre
      3. Industrial Growth Centre
      4. Industrial Estate
      5. Industrial Park
      6. Software Technology Park
      7. Industrial Area
      8. Theme Park

      What is the amount of deduction available under section 80-IC?

      State Amount of deduction
      Sikkim or North Estern States ( Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagalnd and Tripura ) 100% of profit for 10 years commencing from the initial assessment year**
      Himachal Pradesh or Uttaranchal First 5 year :100% of profit commencing from the initial assessment year
      Next 5 year : 25% (30% in case of the company) of profit

      ** Initial Assessment Year :In which undertaking starts to manufacture or produce articles or things or commence operation or completes substantial expansion.