Section 80-IA Deduction: Infrastructure, Power & SEZ (2025–26)

Any company or any other person (including partnership firms, LLPs, and individuals) engaged in the business of developing, operating, and maintaining infrastructure facilities can claim deduction under Section 80-IA. The undertaking must be engaged in eligible business activities such as roads, highways, bridges, airports, ports, inland waterways, inland ports, rail systems, water supply projects, irrigation canals, water treatment systems, water distribution systems, solid waste management systems, industrial parks, SEZs, power generation, transmission, or distribution, and telecom services. However, the business entity must actually own and operate the infrastructure facility — a mere contractor executing the project on behalf of another entity does not qualify. The undertaking must also be a new entity formed specifically for the eligible business and must not have been formed by splitting or reconstructing a business already in existence. Additionally, the undertaking must not use machinery or plant previously used for any purpose in India, except to a limited extent.

Section 80-IA allows a 100% deduction on profits and gains derived from an eligible business for 10 consecutive assessment years. The taxpayer has the flexibility to choose the starting year for the deduction window. Depending on the type of infrastructure: for infrastructure facilities, power, and telecom — the deduction is available for any 10 consecutive years out of the first 15 or 20 years from the date the undertaking begins operations or commences commercial production. For power sector undertakings that begin generation before 31 March 2017, the deduction window is 15 years. For industrial parks and SEZs, the deduction window is typically 10 consecutive years out of 15 years. The taxpayer must plan strategically — choosing the most profitable years within the window to maximise the tax benefit. Once the 10-year deduction period is exhausted, no further deduction is available even if the undertaking continues to generate profits.

Yes. This is one of the most critical practical limitations of Section 80-IA. Even though income from an 80-IA eligible undertaking is fully exempt from regular income tax, the company is still liable to pay Minimum Alternate Tax (MAT) under Section 115JB at the rate of 15% (plus surcharge and cess) on its book profits, which includes the 80-IA exempt income. This means that companies cannot fully escape tax liability merely by claiming 80-IA deductions. The MAT credit (MAT credit entitlement) generated in such years can be carried forward and set off against regular tax payable in future years (up to 15 years), when the regular tax exceeds the MAT liability. For LLPs, AMT (Alternate Minimum Tax) under Section 115JC applies at 18.5% on adjusted total income, subject to similar rules. Individual taxpayers are generally not subject to MAT/AMT on 80-IA income unless they are subject to AMT provisions.

Section 80-IA is the parent provision providing 100% deduction for 10 years for entities engaged in infrastructure development, power, industrial parks, and telecom. Section 80-IAB is a sub-provision specifically applicable to SEZ developers — companies that develop a Special Economic Zone notified under the SEZ Act, 2005. These developers get a 100% deduction on profits for 10 consecutive years out of 15 years from the year in which the SEZ is notified. Section 80-IAC is a separate provision applicable to eligible start-ups incorporated on or after 1 April 2016. Start-ups with turnover up to ₹100 crore are eligible for a 100% deduction on profits for 3 consecutive years out of the first 10 years from incorporation. The start-up must be recognised by the DPIIT and engaged in innovation, development, or improvement of products, processes, or services. All three provisions are under Chapter VI-A of the Income-tax Act and are mutually exclusive — an entity claiming under one sub-section generally cannot claim under another for the same profits.

No. One of the fundamental conditions under Section 80-IA is that the eligible undertaking must be a new undertaking. A business formed by splitting up or reconstruction of an existing business does not qualify for the 80-IA deduction. Similarly, an undertaking formed by transfer of old machinery or plant (exceeding 20% of the total value of machinery or plant used in the new business) from another business does not qualify. The intent behind this restriction is to prevent companies from simply restructuring existing infrastructure operations to claim the deduction. The CBDT and courts have repeatedly upheld this condition, and tax authorities scrutinise corporate restructurings involving 80-IA claims carefully. If, however, a genuinely new undertaking is set up — with fresh investment in new plant, machinery, and operations — the deduction remains available even if the promoters previously operated in the same sector through a different entity.