Amended and updated notes on section 80-LA of Income Tax Act 1961 as amended by the Finance Act 2022 and Income-tax Rules, 1962. Detail discussion on provisions and rules related to deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre.
Chapter VIA (Sections 80A to 80U) of the Income Tax Act 1961 deals with the provisions related to deductions to be made in computing total income. Section 80-LA of IT Act 1961-2022 provides for deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre.
Recently, we have discussed in detail section 80-JJAA (Deduction in respect of employment of new employees) of IT Act 1961.
Today, we learn the provisions of section 80-LA of Income-tax Act 1961 as amended by the Finance Act 2022. The amended provision of section 80-LA is effective for financial year 2022-23 relevant to the assessment year 2023-24.
In this article, you will learn detail of the provisions of section 80-LA of the Income Tax Act, 1961 Bare Act read with the Income-tax Rules, 1962, regulations, notifications, circulars, orders and Press Release by CBDT, Income Tax Department and the Ministry of Law and Justice, Government of India.
Section 80-LA: Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre
Section 80-LA (1):
Where the gross total income of an assessee, being a scheduled bank, or, any bank incorporated by or under the laws of a country outside India; and having an Offshore Banking Unit in a Special Economic Zone, includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such income, of an amount equal to—
- (a) one hundred per cent of such income for five consecutive assessment years beginning with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or any other relevant law was obtained, and thereafter;
- (b) fifty per cent of such income for five consecutive assessment years.
Section 80-LA (1A):
Where the gross total income of an assessee, being a Unit of an International Financial Services Centre, includes any income referred to in sub-section (2), there shall be allowed, in accordance with and subject to the provisions of this section, a deduction from such income, of an amount equal to one hundred per cent of such income for any ten consecutive assessment years, at the option of the assessee, out of fifteen years, beginning with the assessment year relevant to the previous year in which the permission, under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or permission or registration under the Securities and Exchange Board of India Act, 1992 (15 of 1992) or permission or registration under the International Financial Services Centre Authority Act, 2019 was obtained.
[Sub-section (1A) of section 80-LA amended (substituted) w.e.f. 01.04.2022 by the Finance Act 2021]
Section 80-LA (2):
The income referred to in sub-section (1) and sub-section (1A) shall be the income—
- (a) from an Offshore Banking Unit in a Special Economic Zone; or
- (b) from the business referred to in sub-section (1) of section 6 of the Banking Regulation Act, 1949 (10 of 1949) with an undertaking located in a Special Economic Zone or any other undertaking which develops, develops and operates or develops, operates and maintains a Special Economic Zone; or
- (c) from any Unit of the International Financial Services Centre from its business for which it has been approved for setting up in such a Centre in a Special Economic Zone;
- (d) arising from the transfer of an asset, being an aircraft or a ship, which was leased by a unit referred to in clause (c) to a person, subject to the condition that the unit has commenced operation on or before the 31st day of March, 2024.
Explanation For the purposes of this clause, “aircraft” and “ship” shall have the meaning assigned to it in the Explanation to clause (4F) of section 10.
[Clause (d) of sub-section (2) of section 80-LA newly inserted w.e.f. 01.04.2022 by the Finance Act 2021 and amended (inserted and substituted) w.e.f. 1-April-2023 by the Finance Act 2022]
Section 80-LA (3):
No deduction under this section shall be allowed unless the assessee furnishes along with the return of income,—
(i) the report, in the form specified by the Central Board of Direct Taxes under clause (i) of sub-section (2) of section 80LA, as it stood immediately before its substitution by this section, of an accountant as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section; and
(ii) a copy of the permission obtained under clause (a) of sub-section (1) of section 23 of the Banking Regulation Act, 1949 (10 of 1949) or copy of permission or registration obtained under the International Financial Services Centre Authority Act, 2019 (50 of 2019).
.[Clause (ii) of sub-section (3) of section 80-LA has been newly inserted w.e.f. 01.04.2022 by the Finance Act 2021]
Explanation: For the purposes of this section,—
- (a) “International Financial Services Centre” shall have the same meaning as assigned to it in clause (q) of section 2 of the Special Economic Zones Act, 2005;
- (b) “scheduled bank” shall have the same meaning as assigned to it in clause (e) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934);
- (c) “Special Economic Zone” shall have the same meaning as assigned to it in clause (za) of section 2 of the Special Economic Zones Act, 2005;
- (d) “Unit” shall have the same meaning as assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.