CS Executive · Tax Laws and Practice · Deductions
A unit of an International Financial Services Centre commences operations on 1 July 2026 and claims the 100% deduction under section 147. Which condition applies to this claim under the Income-tax Act, 2025 as amended w.e.f. 1-4-2026?
The unit must not be formed by splitting up, reconstruction, reorganisation or transfer of a business already in existence in India. Section 147(5) imposes this for units commencing on or after 1 April 2026, alongside the 100% deduction on eligible income.
- AThe unit must not have been formed by splitting up, reconstruction, reorganisation or transfer of a business already in existence in IndiaCorrect
- BThe deduction is limited to 50% of the eligible income in the first ten years
- CThe unit must have commenced operations before 1 April 2026
- DThe deduction is available for only ten consecutive tax years in every case
Explanation
Section 147(5), as substituted w.e.f. 1-4-2026, denies the deduction to units commencing on or after 1 April 2026 if formed by splitting up, reconstruction, reorganisation or transfer of an existing Indian business. The deduction is 100%, not 50%, and the period is now twenty years out of twenty-five for IFSC units, not ten in every case.
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