Deductions — Part C: Certain Incomes

Profit-linked and income-linked deductions for specific businesses and undertakings — infrastructure, SEZ, start-ups, housing projects, North-East India, SEZ units, bio-waste, additional employment, IFSC, inter-corporate dividends, co-operative societies, authors, and patentees.

📘 Sections: 138 (Infrastructure) · 139 (SEZ developer) · 140 (Start-ups) · 141 (Industrial undertakings) · 142 (Housing projects) · 143 (North-East) · 144 (SEZ units) · 145 (Bio-waste) · 146 (Additional employment) · 147 (IFSC/OBU) · 148 (Inter-corporate dividends) · 149–150 (Co-operative societies) · 151 (Authors) · 152 (Patents)
🔄 Replaces: Sections 80-IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, 80-IE, 10AA, 80JJA, 80JJAA, 80LA, 80M, 80P, 80QQB, 80RRB of the Income Tax Act 1961
⚠️ Note: Most Part C deductions are not available under the new tax regime (Section 202). Exceptions: Section 146 (additional employee cost) and Section 147 (IFSC/OBU) remain available.

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Why "Transitional"?

When the Income Tax Act 2025 replaced the 1961 Act, most profit-linked deductions (80-IA, 80-IB, 80-IBA, 80-IE, 10AA etc.) were time-limited provisions under the 1961 Act — available only for businesses set up during specified periods. Rather than re-enacting them fresh, the 2025 Act simply says: if you were eligible under the old section and still have remaining years of the deduction, continue to get the deduction as if the 1961 Act had not been repealed.

This means: no new businesses qualify for Sections 138, 139, 141, 142, 144 from 1 April 2026. Only existing qualifying businesses with remaining eligible years continue to benefit.

Exceptions — Active Deductions (not transitional):

• Section 140 — Start-ups: Still open to new eligible start-ups incorporated after 1 April 2026
• Section 145 — Bio-waste: Still open to new businesses commencing after 1 April 2026
• Section 146 — Additional employment: Still open for new employment created from 1 April 2026
• Section 147 — IFSC/OBU: Still open to eligible banks and IFSC units
• Section 148 — Inter-corporate dividends: Annual, applies to all domestic companies
• Section 149 — Co-operative societies: Annual, applies to eligible societies
• Section 151 — Authors' royalty: Annual, applies to eligible authors
• Section 152 — Patent royalty: Annual, applies to eligible patentees

TDS deduction under Section 393: Start-ups that deduct TDS on ESOP perquisites can opt for deferred payment in 5 instalments — covered under Section 392. The 100% deduction under Section 140 applies only to profits from eligible business, not to all income of the start-up.

Section 145 — Bio-degradable Waste Processing (80JJA)

100% deduction for 5 consecutive years from commencement of business of collecting and processing/treating bio-degradable waste for:

Active deduction — new businesses commencing after 1 April 2026 can still claim this.

Section 146 — Additional Employee Cost (80JJAA) ✅ Available under New Regime

Deduction of 30% of additional employee cost for 3 consecutive years from the year employment is provided. This is an employment-creation incentive for businesses subject to tax audit (Section 63 applies).

Parameter	Detail
Who can claim	Any assessee to whom Section 63 (tax audit) applies — having business income
Rate	30% of additional employee cost
Period	3 consecutive years from year of employment
Additional employee cost	Emoluments paid to additional employees whose monthly emoluments do not exceed ₹25,000 and who are employed for 240+ days (or 150+ days for apparel/footwear/leather)
Not available if	Business formed by splitting/reconstruction of existing business; or acquired through transfer from another person or business reorganisation
EPF condition	Emoluments must be paid through bank account; employee's PF contribution must be paid by the employer

Section 147 — Offshore Banking Units & IFSC (80LA) ✅ Available under New Regime

100% deduction on specified income for Offshore Banking Units (OBUs) in SEZs and units of International Financial Services Centres (IFSC). This is an active deduction — new IFSC units continue to qualify.

Assessee	Eligible Income	Period
Scheduled bank / foreign bank with OBU in SEZ	Income from OBU (interest, fee etc.) and from offshore derivative instruments	10 consecutive years from relevant year
Unit of IFSC	Income from prescribed activities in IFSC	Any 10 years out of 15 from relevant year — at assessee's option

How it works:

A domestic company receiving dividends from another domestic company, foreign company, or business trust can deduct from its own total income an amount equal to the dividends it distributes to its own shareholders — provided the distribution is made at least one month before the due date of filing its own income tax return.

Effect: Only the net retained dividend (not passed on) is taxed in the receiving company's hands. The portion distributed to its own shareholders is effectively deducted — preventing triple or quadruple taxation down the ownership chain.

No double deduction [Section 148(2)]: Once a dividend distribution has been allowed as deduction in any year, no deduction shall be allowed for the same amount in any other year.

Example: HoldCo receives dividend of ₹10 crore from SubCo. HoldCo distributes ₹8 crore as dividend to its own shareholders before the return due date. HoldCo can deduct ₹8 crore under Section 148 — only ₹2 crore is taxable in HoldCo's hands as dividend income.

Important restriction: Section 149 is NOT available to co-operative banks (other than primary agricultural credit societies and primary co-operative agricultural and rural development banks) in respect of banking income — such co-operative banks are taxed like other banks.

📖 Deductions & Exemptions — Complete Series

📌 Source: Income Tax Act 2025, Act No. 30 of 2025 — Sections 138–152 (pages 175–190), as published in the Gazette of India Extraordinary dated 21st August 2025. Use the Section Cross-Reference tool to map 1961 Act sections to 2025 Act equivalents.