Section 80-IC of Income Tax Act, 1961

Section 80-IC of the Income Tax Act 1961 offers tax incentives for businesses operating in specific regions of India, aiming to promote industrial development and economic growth in less-developed areas. This section allows eligible businesses in designated states, such as Sikkim, Himachal Pradesh, Uttarakhand, and the Northeastern states, to claim deductions on profits from their business activities.

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What is Section 80-IC?

Section 80-IC of the Income Tax Act, 1961 is a provision that offers tax incentives to businesses operating in specific industries and locations in India. The primary goal is to stimulate entrepreneurship and investment in regions that may have experienced slower economic development.

States Covered Under Section 80-IC

Name of States

North Eastern States (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura)

Sikkim

Himachal Pradesh

Uttranchal

Amount of Deduction Available Under Section 80-IC

State	Amount of deduction
Himachal Pradesh or Uttaranchal	First 5 years: 100% of profits starting from the initial assessment year. Next 5 years: 25% of profits (30% for companies).
Sikkim or North Eastern States	100% of profit for 10 years starting from the initial assessment year**

**Initial Assessment Year: In this process, the business begins manufacturing or producing goods, starts operations, or completes a significant expansion.

Conditions to Claim Deduction Under Section 80-IC

Here are the key conditions required to claim a deduction under Section 80-IC:

Condition	Details
New Enterprise	The enterprise must be a new undertaking, not formed by splitting up or restructuring an existing business. Exception: Businesses that discontinued operations due to major damage (building, machinery, etc.) caused by events like floods, earthquakes, accidental fire, riots, or enemy action can be eligible if they rebuild.
New Plant & Machinery	The undertaking must not be formed by transferring used plant and machinery. Exception: Old machinery up to 20% of the total value of plant and machinery is allowed. Second-hand imported machinery is considered new if: It was not previously used in India It’s imported to India Depreciation cannot be claimed for pre-installation use.
Commencement Period	The business must start operations or substantial expansion within specific dates based on location: Sikkim: 23 Dec 2002 - 31 Mar 2007 Himachal Pradesh or Uttarakhand: 7 Jan 2003 - 31 Mar 2012 Northeastern States: 24 Dec 1997 - 31 Mar 2007
Substantial Expansion	Substantial expansion is defined as an investment in plant and machinery that is at least 50% of the book value at the start of the year in which the expansion occurs. Example: If A Ltd makes an investment reaching 51% in one expansion over two years, it qualifies. For B Ltd, however, two smaller expansions (28% + 23%) do not qualify, as each is under 50%.
Audit Report	The deduction is only available if the accounts are audited by a Chartered Accountant (CA). The CA must sign the audit report, which is in Form 10CCB, and submit it along with the Income Tax Return.
Production of Specified Goods	Each state has specific guidelines on goods that qualify for deductions: - Sikkim: Articles not listed in the Thirteenth Schedule (Part A) in industrial zones; articles in the Fourteenth Schedule (Part B) in other areas. - Himachal Pradesh/Uttarakhand: Articles not in Thirteenth Schedule (Part B) in industrial zones; articles in Fourteenth Schedule (Part C) in other areas. - Northeastern States: Articles not in Thirteenth Schedule for industrial zones; articles in Fourteenth Schedule (Part A) in other areas. Eligible Industrial Zones include Export Processing Zones, Industrial Estates, Parks, and Software Technology Parks.
Timely Income Tax Return	The Income Tax Return must be filed on time, with the deduction claimed in the return. A belated return disqualifies the deduction.

Understanding Your Tax Liability

Effective financial planning requires a clear understanding of your tax obligations. An Income Tax Calculator is a valuable tool that simplifies this process. By inputting your income and eligible deductions, this online tool provides an estimated tax liability. This eliminates the need for manual calculations, saving time and reducing errors. Leveraging an income tax calculator empowers you to optimize your tax savings legally and make informed financial decisions.

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FAQs

Which states are covered under Section 80-IC?
The states covered under Section 80-IC are:
- Arunachal Pradesh
- Assam
- Manipur
- Meghalaya
- Mizoram
- Nagaland
- Sikkim
- Tripura
- Himachal Pradesh
- Uttarakhand
What is the amount of deduction available under Section 80-IC?

The amount of deduction varies depending on factors like the industry, location, and period of operation. Generally, it ranges from 10% to 100% of the profits and gains derived from the eligible business.
What are the eligibility criteria for claiming deduction under Section 80-IC?
To claim the deduction, businesses must meet specific criteria, including:
- Location: The business must be located in one of the specified states.
- Industry: The business must be engaged in a specified industry.
- Time Limit: The deduction is available for a specific period.
- Other Conditions: The business must fulfill other conditions like obtaining necessary approvals, maintaining proper records, and filing income tax returns on time.
How can I claim the deduction under Section 80-IC?

To claim the deduction, you need to file your income tax return and provide the necessary documentation to prove your eligibility. It's advisable to consult with a tax professional to ensure accurate calculations and compliance with all relevant rules and regulations.

†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. The sorting is based on past 10 years’ fund performance (Fund Data Source: Value Research). For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
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