The Income-tax Act, 2025 provides significant tax incentives for Special Economic Zones (SEZs), developers of SEZs, and housing projects. These incentives include deductions under sections 138, 139, 140, 141, 142, 143, and 144, as well as for specified business under section 46. Form 32 is the prescribed audit report for claiming these deductions. Understanding this form is essential for developers, SEZ units, and housing project promoters seeking to claim these tax benefits.
Overview of Relevant Sections
Section 46 — Capital Expenditure of Specified Business
Deduction for whole of capital expenditure incurred for specified business, including:
- Cold chain facilities
- Warehousing facilities
- Cross-country natural gas/petroleum pipeline networks
- Hotels (2-star or above)
- Hospitals (100 beds or more)
- Housing projects under slum redevelopment or affordable housing schemes
- Fertilizer production
- Inland container depots and container freight stations
- Bee-keeping and honey production
- Warehousing for sugar
- Slurry pipelines
- Semiconductor wafer fabrication units
- Infrastructure facilities
Section 138 — Industrial Undertakings in Infrastructure
Deduction for profits and gains from industrial undertakings or enterprises engaged in infrastructure development (section 80-IA of the repealed Income-tax Act, 1961).
Section 139 — SEZ Development
Deduction for profits and gains from developing Special Economic Zones (section 80-IAB of the repealed Income-tax Act, 1961).
Section 140 — Eligible Start-ups
Deduction for profits and gains from eligible business of eligible start-ups.
Section 141 — Certain Industrial Undertakings
Deduction for profits and gains from certain industrial undertakings (section 80-IB of the repealed Income-tax Act, 1961).
Section 142 — Housing Projects
Deduction for profits and gains from housing projects (section 80-IBA of the repealed Income-tax Act, 1961).
Section 143 — North-Eastern States
Deduction for certain undertakings in North-Eastern States.
Section 144 — SEZ Units
Deduction for newly established units in SEZs (section 10AA of the repealed Income-tax Act, 1961).
Form 32 — Audit Report
Purpose
Form 32 is the report of audit of the accounts of the undertaking or enterprise claiming deduction under sections 46, 138, 139, 140, 141, 142, 143, or 144.
Filing Details
To Whom
- Assessing Officer having jurisdiction over the assessee
Timing
- Before the specified date referred to in section 63
Mode
- Electronic filing as specified by the Principal Director General of Income-tax (Systems)
Verification
- By the accountant (as defined in section 515(3)(b))
- Signed and verified by the accountant
Structure
Form 32 is divided into different parts based on the section under which deduction is claimed.
General Information (Common to All Parts)
- Name of the assessee
- PAN
- Address
- Tax year
- Name of the undertaking/enterprise
- Address of the undertaking/enterprise
- Date of commencement of operations
- Section under which deduction is claimed
Part B1 — Section 46 (Specified Business)
Applicability
For assessees claiming deduction under section 46 for specified business.
Contents
- Description of the specified business
- Date of commencement of operations
- Capital expenditure incurred
- Details of assets acquired
- Whether conditions under section 46 are fulfilled
- Copy of agreement entered into with Central Government, State Government, or local authority
Key Conditions
- Business not set up by splitting up or reconstruction of existing business
- Business not set up by transfer of machinery or plant previously used
- Capital expenditure incurred wholly and exclusively for specified business
- Assets used only for specified business for eight years
Part B2 — Section 138 (Infrastructure)
Applicability
For assessees claiming deduction under section 138 for infrastructure undertakings.
Contents
- Description of the infrastructure facility
- Date of commencement of operations
- Whether the undertaking is eligible for deduction
- Copy of Form 10CCB (under the repealed Income-tax Act, 1961)
Key Conditions
- Undertaking engaged in infrastructure development (section 80-IA)
- Deduction as per section 80-IA of the repealed Act
Part B3 — Section 139 (SEZ Development)
Applicability
For assessees claiming deduction under section 139 for SEZ development.
Contents
- Description of the SEZ
- Date of notification of the SEZ
- Whether the Developer is eligible for deduction
- Copy of the notification of the SEZ
Key Conditions
- Developer developing a SEZ notified on or after 1st April, 2005
- Deduction as per section 80-IAB of the repealed Act
Part B4 — Section 140 (Eligible Start-ups)
Applicability
For assessees claiming deduction under section 140 for eligible start-ups.
Contents
- Description of the business
- Date of incorporation
- Total turnover
- Whether the assessee is an eligible start-up
- Copy of certificate from Inter-Ministerial Board of Certification
Key Conditions
- Company or LLP incorporated on or after 1st April, 2016 but before 1st April, 2030
- Total turnover not exceeding Rs. 3 crore (for the relevant tax year)
- Certificate from Inter-Ministerial Board of Certification
- Not formed by splitting up or reconstruction of existing business
- Not formed by transfer of machinery or plant previously used
Part B5 — Section 141 (Certain Industrial Undertakings)
Applicability
For assessees claiming deduction under section 141 for certain industrial undertakings.
Contents
- Description of the industrial undertaking
- Date of commencement of operations
- Whether the undertaking is eligible for deduction
- Copy of approval certificate and completion certificate of the Housing Project
- Copy of notification of the scheme by the Board
Key Conditions
- Undertaking eligible under section 80-IB of the repealed Act
- Deduction as per section 80-IB of the repealed Act
Part B6 — Section 142 (Housing Projects)
Applicability
For assessees claiming deduction under section 142 for housing projects.
Contents
- Description of the housing project
- Date of approval of the project
- Date of completion of the project
- Whether the project is eligible for deduction
- Copy of approval certificate and completion certificate
- Copy of notification issued under section 80-IBA (for Rental Housing Project)
Key Conditions
- Housing project eligible under section 80-IBA of the repealed Act
- Deduction as per section 80-IBA of the repealed Act
Part B7 — Section 143 (North-Eastern States)
Applicability
For assessees claiming deduction under section 143 for undertakings in North-Eastern States.
Contents
- Description of the undertaking
- Date of commencement of operations
- Whether the undertaking is in a North-Eastern State
- Whether the undertaking is eligible for deduction
- Copy of agreement entered into with Central Government, State Government, or local authority
Key Conditions
- Undertaking in North-Eastern States
- Engaged in manufacture/production of eligible article or thing, or eligible business
- Deduction for ten consecutive tax years
Part D — Section 144 (SEZ Units)
Applicability
For assessees claiming deduction under section 144 for SEZ units.
Contents
- Description of the SEZ unit
- Date of commencement of operations
- Whether the unit is eligible for deduction
- Details of export of articles/things or services
Key Conditions
- Unit in SEZ engaged in manufacture/production of articles/things or providing services
- Deduction as per section 10AA of the repealed Act
Practical Considerations
Timely Filing
Form 32 must be filed before the specified date. The accountant must complete the audit and prepare the report well in advance.
Separate Audit Report
A separate audit report is required for each undertaking or enterprise claiming deduction.
Accompanying Documents
The audit report must be accompanied by:
- Profit and loss account of the undertaking/enterprise
- Balance sheet of the undertaking/enterprise
- The documents as if the undertaking/enterprise were a distinct entity
Applicability of Sections
- For section 46: Use Part B1
- For section 138: Use Part B2
- For section 139: Use Part B3
- For section 140: Use Part B4
- For section 141: Use Part B5
- For section 142: Use Part B6
- For section 143: Use Part B7
- For section 144: Use Part D
Documents to be Attached
| Section | Relevant Part | Documents to be Attached |
|---|---|---|
| 46 | B1 | Copy of agreement entered into with Central Government, State Government, or local authority |
| 138 | B2 | Copy of Form 10CCB (under the repealed Act) |
| 139 | B3 | Copy of notification of the SEZ |
| 140 | B4 | Copy of certificate from Inter-Ministerial Board of Certification |
| 141 | B5 | Copy of approval certificate and completion certificate of the Housing Project; Copy of notification of the scheme by the Board |
| 142 | B6 | Copy of approval certificate and completion certificate; Copy of notification issued under section 80-IBA (for Rental Housing Project) |
| 143 | B7 | Copy of agreement entered into with Central Government, State Government, or local authority |
Penalties for Non-Compliance
- Failure to file Form 32: Penalty under section 465
- Incorrect information in Form 32: Penalty under section 463
Expert Advisory
Given the complexity of Form 32 and the various deductions available, professional advisory is essential. Anuj Desai & Associates provides comprehensive services for Form 32 and related deductions, including:
- Eligibility Assessment: Determining eligibility for deduction
- Audit Report Preparation: Preparation of Form 32
- Compliance Review: Review of compliance with the relevant section
- Representation: Representation before tax authorities
With deep expertise in tax incentive provisions, Anuj Desai & Associates ensures that your deduction claims are accurate and compliant.
Need expert assistance with Form 32 or tax incentives for SEZs, developers, or housing projects? Contact Anuj Desai & Associates today for comprehensive advisory, audit, and compliance services. [Contact Us] to schedule a consultation.