Section 80-ID

What is Section 80-ID?

Section 80-ID of the Income Tax Act was introduced in the assessment year 2008-09 to encourage growth in the hospitality and convention sectors. These deductions are aimed at boosting development in targeted regions by providing financial incentives to these businesses. Under this section, a tax deduction is available to taxpayers involved in:

• Hotel Business: Specifically, for hotels situated in designated or specified areas, enabling them to claim tax deductions.

• Convention Centre Business: This applies to taxpayers who build, own, and operate convention centres within specified areas, allowing them to benefit from similar tax deductions.

Areas Covered Under Section 80-ID

Amount of Deduction Available Under Section 80-ID

A 100% profit deduction is permitted for 5 consecutive assessment years, starting from the initial assessment year. 

*The "initial assessment year" refers to the assessment year corresponding to the financial year in which the hotel business begins operations or the convention centre becomes commercially operational.

Conditions to Claim Deduction Under Section 80-ID?

To claim this deduction, certain conditions must be met:

1. New Undertaking:

   • The business should be a new undertaking, not formed by splitting or reconstructing an existing business.

   • Exception: Undertakings discontinued due to natural calamities, civil disturbances, accidents, or enemy actions can be eligible.

2. New Plant and Machinery:

   • The business should not use old plant and machinery transferred from another business.

   • Exception: Up to 20% of the total value of plant and machinery can be from old assets.

   • Second-hand imported machinery can be treated as new if:

     • It was not previously used in India.

     • It is imported into India.

     • Depreciation has not been claimed on it before.

   

3. Commencement Period:

   The commencement period for claiming the deduction varies based on the type of hotel and the source of income:

   Type of Hotel/Source of Income	Construction Period	Applicable Assessment Year
   2/3/4 Star Hotel	01 April 2007 to 31 July 2010	2008-09 onwards
   2/3/4 Star Hotel at World Heritage Site	01 April 2008 to 31 July 2013	2009-10 onwards
   Convention Center	01 April 2007 to 31 July 2010	2008-09 onwards

4. Audit Report:

   An audit report in Form 10CCBBA, prepared by a Chartered Accountant, must be submitted.

5. Income Tax Return Filing:

   The income tax return must be filed on time, claiming the deduction under Section 80-ID.

6. No Other Deductions:

   No deductions under other sections of Chapter VIA or Section 10AA can be claimed for the same income.

What is the Definition of a Hotel As Per section 80-ID?

As per Section 80-ID of the Income Tax Act, 1961, a "hotel" is defined as a hotel of two-star, three-star, or four-star category, as classified by the Central Government.

What is the Definition of a Convention Centre As Per section 80-ID?

As per Section 80-ID of the Income Tax Act, 1961, a "convention centre" is defined as a building of a prescribed area comprising convention halls to be used for the purpose of holding conferences and seminars, being of such size and number and having such other facilities and amenities, as may be prescribed.

How to Determine Your Income Tax?

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Conclusion

Section 80-ID serves as a valuable tool for supporting regional development by offering tax relief to hotels and convention centres in specified areas. By reducing the tax burden for qualifying businesses, it encourages investment and expansion within these sectors, ultimately contributing to the broader economy.