| RELEVANT PROVISIONS | ||
| Sl. No. | Criteria | Conditions |
| 1. | NATURE OF BUSINESS | (a) Manufacture or produce an eligible articles or thing; or
(b) Undertakes Substantial Expansion to manufacture or produce eligible articles or thing; and (c) Carries on ‘eligible business’ |
| 2. | COMMENCEMENT OF
BUSINESS |
Between – 1 April 2007 To 31 March 2017 |
| 3. | LOCATION OF
UNDERTAKING |
NORTH-EASTERN STATES being the states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim & Tripura. |
| 4. | RESTRICTIONS | (a) Should not be formed by SPLITTING UP, or the RECONSTRUCTION of a business already in existence; or
(b) Not formed by TRANSFER of Plant & Machinery used for any purpose. However, if any ‘second-hand’ Plant & Machinery, used outside India by any person other than the assessee, & imported into India, shall not be regarded as Transfer of Plant & Machinery. Further, where, the total value of the Plant & Machinery, transferred does not exceed 20% of the Total Value of Plant & Machinery used in the Business, the above condition is deemed to be complied with. |
| 5. | SEPARATE ACCOUNTS & AUDIT |
|
| 6. | RELATED PARTY
TRANSACTIONS |
POWER OF AO TO RECOMPUTE PROFITS:
|
| 7. | AMOUNT OF DEDUCTION | 100% of the Profits & Gains DERIVED from such business |
| 8. | PERIOD OF DEDUCTION | 10 Consecutive Assessment Years Commencing with the Assessment Year in which the undertaking begins to Manufacture or Produce Articles or Things, or Completes Substantial Expansion. |
| TAX PLANNING | ||
| 1. | RECOMMENDED
BUSINESS ORGANISATION [STATUS] |
1ST Preference Partnership Firm
No provision for Interest on Capital & Remuneration To Working Partners 2ND Preference Company – considering Capital Requirements. 3RD Preference Sole Proprietorship – Only if Capital Requirements can be met by Proprietor without borrowings from Related Parties. |
INTERPRETATION
“Eligible Articles or Things” include any article or thing, excluding – Tobacco & Manufactured Tobacco Substitutes, Pan Masala, Plastic Carry Bags (Less than 20 Microns), & Certain Goods produced by Petroleum Oil or Gas Refineries.
“Eligible Business” includes – Hotel (Not Below 2 Star Category), Adventure & Leisure Sports including Ropeways, Nursing Homes (Minimum 25 Beds), Old-age Home, Information Technology related Training Center, Manufacturing Information Technology related Hardware, and Vocational Training Institute (Hotel Management, Food Craft, Entrepreneurship Development, Nursing & Para Medical, Civil Aviation & Fashion Design & Industrial Training.
“Substantial Expansion” means investment in the plant & machinery by at least 25% of the book value of plant & machinery (before taking depreciation in any year), as on the 1st Day of the year in which Substantial Expansion takes place.
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8 responses to “DEDUCTION UNDER SECTION 80IE – AN OPPORTUNITY”
Can you please tell me the circular number of income tax under which the deduction was announced u/s 80IE
The deduction under section 80IE was announced by Section 32 of the Finance Act, 2007.
You can visit for the Office Memorandum issued by Dept. of Industrial Policy & Promotion, Ministry of Commerce, Govt. of India.
Among others, it provides for 100% Exemption from Excise Duty & Income Tax (subject to MAT) for a period of 10 years from the commencement of commercial operations + Capital Investment Subsidy + Interest Subsidy on Working Capital Loan + Transport Subsidy
The Finance Bill, 2012 proposes to introduce:
1. Alternative Minimum Tax on all persons other than company where gross total income exceeds Rs. 20 lakhs. Income Exempt under Section 80IE is liable to Alternative Minimum Tax in case of persons other than company.
Note: Minimum Alternative Tax on companies was always there.
2. Transfer pricing provisions are proposed to be introduced for Related Party Transactions in respect of undertaking claiming exemption u/s 80IE.
why 1st preference has been given to partnership firm
1st Preference is given to partnership firms without provision for distribution of profits as salary / interest to partners to avail 100% exemption in the hands of the firm. Distribution as interest / salary to partners will attract tax at normal rates in the hands of the partners. 2. Earlier Alternative Minimum Tax (AMT) was not applicable on Partnership Firms (when the article was written).
In case of companies, Corporate Dividend Tax is applicable in case of distribution of profits to shareholders and Minimum Alternative Tax (MAT) is also applicable.
Therefore, effective tax rate as applicable on Companies is higher than that applicable on Partnership Firms and hence Partnership Firm is a preferred choice with respect to Tax Planning in case of Deduction u/s 80IE to avail maximum Tax Benefit.
Can you please clarify whether Excise Duty is also exempted for units that are started for manufacture under section 80IE ? What about Service Tax ? Is this also exempted, for services ( for example IT services) – for both services rendered within the NE states and also to outside , to rest of Country ?
WHICH FORM IS REQUIRED TO BE FILED FOR CLAIMING THE DEDUCTION UNDER THE SECTION 80IE
Form 10CCB
At present audit report – online does not have an option for deduction u/s 80IE. Hence, you need to file the same manually before the due date.