Applicable to: Manufacturing, SMEs, and select service providers
This section provides partial to full tax exemptions (25%–100%) for eligible businesses, targeting job creation and regional development.
Key Features (AY 2025-26)
1. Eligible Categories & Deduction Rates
| BUSINESS TYPE | DEDUCTION | PERIOD | SPECIAL CONDITIONS |
| Small-Scale Industries (Turnover ≤ ₹50Cr) | 25% of profits | 10Y | Must employ ≥20 workers |
| Himalayan States/Northeast Units | 100% | 10Y | Operational after 2007 |
| Hospitals (Rural/Tier-2/3 Cities) | 100% | 5Y | 100+ beds |
| Affordable Housing Projects | 100% | 5Y | Approval by 2018 |
| Cold Chain Storage | 100% | 5Y | Operational after 2012 |
2. Common Conditions
✅ Commencement Window: Must start operations by 31 March 2021 (most categories)
✅ Audit Requirement: Mandatory if turnover > ₹1Cr
✅ MAT Applicability: 15% (unless exempt under Section 115JB)
3. Claim Period
- Starts from the year of first revenue generation
- Must be consecutive years(cannot skip)
Illustrative Examples
Case 1: SME in Gujarat (Turnover ₹40Cr)
- Deduction:25% of profits for 10Y
- Annual Profit:₹2Cr → Taxable Profit: ₹1.5Cr
- Tax Saved (@30%):₹15L/year (Total: ₹1.5Cr over 10Y)
Case 2: Hospital in Dehradun (150 Beds)
- Deduction:100% for 5Y
- Annual Profit:₹3Cr → Tax Saved: ₹90L/year (Total: ₹4.5Cr)
Comparison with Similar Sections
| Section | Focus | Deduction | Period |
| 80-IB | SMEs/Regional Dev. | 25%–100% | 5–10Y |
| 80-IA | Infrastructure | 100% | 10Y |
| 80-IAC | Startups | 100% | 3Y |
Pro Tips
- Verify Commencement Date:Most benefits expired for new units post-2021.
- Document Employment:For SME claims, maintain payroll records for ≥20 workers.
- Segregate Incomes:Only eligible business profits qualify (exclude dividends, capital gains).
FAQs
Q: Can a unit claim both 80-IB and 80-IA?
A: No, only one per undertaking (but different units may use different sections).
Q: Is GST turnover included in ₹50Cr SME limit?
A: Yes, all revenue counts for eligibility.
Q: Can losses be carried forward post-80-IB?
A: Yes, but post-deduction profits can’t offset pre-deduction losses.
Current Status & Sunset Clauses
- No new approvalsfor most categories post-31-Mar-2021.
- Existing claimants can continue till their deduction period ends.
Section 80-IB has been pivotal for SMEs and regional industries, offering multi-year tax relief. While largely closed for new units, existing beneficiaries should:
- Maximize claimsbefore periods expire
- Comply with audit/employment norms
- Explore 80-IACif eligible as a startup
