Section 46 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 46 lets an assessee claim the whole of the capital expenditure incurred wholly and exclusively for a specified business, such as a cold chain facility, a warehouse, a pipeline, a hotel, a hospital, a fertilizer plant or an infrastructure facility, in the tax year it is incurred. The option comes with conditions, a Table of commencement dates, and a rule that the asset be used only for the specified business for eight years. This article explains the eleven sub-sections as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026.
An assessee may, at his option, deduct the whole of the capital expenditure incurred wholly and exclusively for a specified business in the tax year in which it is incurred (or, if capitalised before operations begin, in the tax year the business commences). The business must commence operations on or after the date in the Table in sub-section (6), must not be formed by splitting up or reconstruction or by transfer of used plant, and the asset must be used only for the specified business for eight years, failing which the deduction (less depreciation) becomes income. Expenditure on land, goodwill or financial instruments, and payments above Rs. 10,000 in a day not made through a specified banking or online mode, are not capital expenditure for this section.
Where this section sits
Section 46 follows section 45 (scientific research), in the article on section 45, and is followed by sections 47 to 50 in the article on agricultural extension, skill development and the development accounts. Depreciation, which this deduction displaces, is in our post on Section 33. For planning a capital project in one of these sectors, our tax planning advisory team can help.
Section 46(1) and (2): the deduction
- (1) An assessee, at his option, is allowed a deduction of the whole of the capital expenditure incurred, wholly and exclusively, for the purposes of any specified business carried on by him, during the tax year in which the expenditure is incurred.
- (2) Where the expenditure is incurred before the commencement of operations and is capitalised in the books as on the date of commencement, it is allowed in the tax year in which the business is commenced.
Section 46(11)(d): what is a "specified business"
| Item | Specified business |
|---|---|
| (i) | Setting up and operating a cold chain facility |
| (ii) | Setting up and operating a warehousing facility for storage of agricultural produce |
| (iii) | Laying and operating a cross-country natural gas or crude or petroleum oil pipeline network for distribution, including integral storage facilities |
| (iv) | Building and operating, anywhere in India, a hotel of two star or above category as classified by the Central Government |
| (v) | Building and operating, anywhere in India, a hospital with at least 100 beds for patients |
| (vi) | Developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government and notified by the Board in accordance with the guidelines as may be prescribed |
| (vii) | Developing and building a housing project under a scheme for affordable housing framed by the Central Government or a State Government and notified by the Board in accordance with the guidelines as may be prescribed |
| (viii) | Production of fertilizer in India |
| (ix) | Setting up and operating an inland container depot or a container freight station notified or approved under the Customs Act, 1962 |
| (x) | Bee-keeping and production of honey and beeswax |
| (xi) | Setting up and operating a warehousing facility for storage of sugar |
| (xii) | Laying and operating a slurry pipeline for the transportation of iron ore |
| (xiii) | Setting up and operating a semi-conductor wafer fabrication manufacturing unit notified by the Board in accordance with the guidelines as may be prescribed |
| (xiv) | Developing, or maintaining and operating, or developing, maintaining and operating, a new infrastructure facility |
"Infrastructure facility" means a road including toll road, a bridge or a rail system; a highway project including housing or other integral activities; a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; and a port, airport, inland waterway, inland port or navigational channel in the sea. "Cold chain facility" means a chain of facilities for storage or transportation of agricultural and forest produce, meat and meat products, poultry, marine and dairy products, products of horticulture, floriculture and apiculture and processed food items under scientifically controlled conditions including refrigeration and other facilities necessary for preservation of the produce. What the Board has notified is not in the text consulted.
Section 46(3): conditions the business must meet
All of the following:
- (a) it is not set up by splitting up, or the reconstruction, of an existing business;
- (b) it is not set up by the transfer of machinery or plant previously used for any purpose to the specified business;
- (c) for a pipeline business under (11)(d)(iii): it is owned by a company formed and registered in India under the Companies Act, 2013, or a consortium of such companies, or an authority, board or corporation established under a Central or State Act; approved by the Petroleum and Natural Gas Regulatory Board and notified by the Central Government; has made available for common carrier use by any person other than the assessee or an associated person not less than the proportion of its total pipeline capacity specified by the Board's regulations; and fulfils any other prescribed condition;
- (d) for an infrastructure facility under (11)(d)(xiv): it is owned by a company registered in India, a consortium of such companies, or an authority, board, corporation or body established under a Central or State Act, and that entity has entered into an agreement with the Central Government, a State Government, a local authority or any other statutory body for developing or operating and maintaining (or both) a new infrastructure facility.
The proportion in (c)(iii) is set by regulations and the Act prints no figure.
Section 46(4) and (5): no double benefit
- (4) If a deduction under sub-section (1) is claimed and allowed, no deduction is allowed under the provisions of Chapter VIII-C in relation to that specified business for the same or any other tax year.
- (5) No deduction for the expenditure under any other section in any tax year, or under section 46 in any other tax year, if it has been claimed and allowed.
Section 46(6): when operations must have commenced
The section applies to the business in column B of the Table only if it commences operations on or after the date in column C.
| Serial number | Nature of specified business | Commencement of operations on or after |
|---|---|---|
| 1 | Laying and operating a cross-country natural gas pipeline network for distribution, including storage facilities being an integral part | 1st April, 2007 |
| 2 | Building and operating a new hotel of two star or above category | 1st April, 2010 |
| 3 | Building and operating a new hospital with at least 100 beds | 1st April, 2010 |
| 4 | Housing project under a slum redevelopment or rehabilitation scheme, as notified | 1st April, 2010 |
| 5 | Housing project under an affordable housing scheme, as notified | 1st April, 2011 |
| 6 | A new plant or newly installed capacity in an existing plant for production of fertilizer | 1st April, 2011 |
| 7 | Inland container depot or container freight station | 1st April, 2012 |
| 8 | Bee-keeping and production of honey and beeswax | 1st April, 2012 |
| 9 | Warehousing facility for storage of sugar | 1st April, 2012 |
| 10 | Slurry pipeline for transportation of iron ore | 1st April, 2014 |
| 11 | Semi-conductor wafer fabrication manufacturing unit, as notified | 1st April, 2014 |
| 12 | Developing, or operating and maintaining, or developing, operating and maintaining, any infrastructure facility | 1st April, 2017 |
| 13 | In all other cases | 1st April, 2009 |
The Table has no separate row for the cold chain facility or the warehouse for agricultural produce; the text leaves them to serial number 13, "in all other cases", or to another row if its words fit.
Section 46(7) and (8): hotels and links to other sections
- (7) Where the assessee builds a hotel of two star or above category and later transfers the hotel operation to another person while retaining its ownership, he is deemed to be carrying on the specified business in (11)(d)(iv).
- (8) Sections 122(6) and 140(8) and (13) apply, so far as may be, to goods, services or assets held for the specified business.
Section 46(9) and (10): eight-year use and recovery
Any asset for which a deduction is claimed and allowed:
- (a) shall be used only for the specified business for a period of eight years beginning with the tax year in which it is acquired or constructed; and
- (b) if used for another purpose during that period (and not chargeable to tax under section 26(2)(k)), the total deduction claimed and allowed in one or more tax years, as reduced by the depreciation allowable under section 33 as if no deduction under section 46 had been allowed, is deemed to be income under "Profits and gains of business or profession" of the tax year in which the asset is so used.
Sub-section (10): clause (9)(b) does not apply to a company that has become a sick industrial company under section 17(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 (as it stood before its repeal) during the eight-year period. That Act is another law; check it.
Section 46(11): other definitions
- Associated person (a): a person who participates, directly or indirectly, in the management, control or capital of the assessee; holds shares carrying at least 26 per cent of the voting power; appoints more than half of the board or governing board (or one or more executive directors); or guarantees at least 10 per cent of the assessee's total borrowings.
- (e) Imported plant: machinery or plant used outside India by another person is not "previously used" if it was not used in India before installation, is imported into India, and no depreciation was allowed or is allowable on it before installation.
- (f) Small transfers: if used machinery or plant transferred to the specified business is not more than 20 per cent of the total value of machinery or plant used in the business, the condition in (3)(b) is deemed complied with.
- (g) Capital expenditure excludes expenditure (i) for which the payment or aggregate of payments to a person in a day exceeds Rs. 10,000 and is not through a specified banking or online mode; or (ii) on acquisition of land, goodwill or financial instrument.
Worked example: a new hospital
Arogya Care Pvt Ltd (invented) builds a hospital with 120 beds that begins operations after 1st April, 2010 (serial number 3 of the Table). It spends Rs. 8,00,00,000 in total: Rs. 1,50,00,000 on land, Rs. 6,00,00,000 on building and equipment paid by bank transfer, and Rs. 50,00,000 on equipment paid partly in cash, of which cash payments of Rs. 40,000 were made to a single supplier on one day. The land is excluded by (11)(g)(ii). The Rs. 40,000 cash payment exceeds Rs. 10,000 and is excluded by (11)(g)(i). The capital expenditure for section 46 is 8,00,00,000 minus 1,50,00,000 minus 40,000 = Rs. 6,48,60,000 if the company opts for the deduction. If, within eight years, it uses a part of the building for a non-specified business, the deduction claimed (as reduced by depreciation allowable under section 33 as if no section 46 deduction had been allowed) is deemed income in the year of that use.
Need help with a capital project?
Whether a business is a specified business, whether the commencement date is met, and whether the eight-year use rule can be honoured are matters to settle before the project spends. To plan a project in one of these sectors, see our tax planning advisory service.
Key takeaways
- The whole of the capital expenditure of a specified business can be deducted at the assessee's option.
- Fourteen businesses are specified; the Table of thirteen rows fixes commencement dates.
- The business must not be a reconstruction or built on previously used plant, with limited exceptions.
- Land, goodwill, financial instruments and large non-bank payments are not capital expenditure for this section.
- The asset must stay in the specified business for eight years, or the deduction (less depreciation) becomes income.
- Chapter VIII-C and other sections cannot be claimed on the same expenditure.
Read next
- Section 45: scientific research expenditure and Schedule XIII
- Sections 47 to 50: agricultural extension, development accounts, Site Restoration Fund and trade associations
- Section 33: depreciation
- Section 26: business income
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.