Sections 138 to 144 of the Income Tax Act, 2025 provide deductions for businesses engaged in infrastructure development, Special Economic Zones, industrial undertakings, and housing projects. These provisions correspond to the earlier Sections 80-IA, 80-IAB, 80-IB, 80-IBA, and 10AA of the Income Tax Act, 1961. Understanding the audit report requirements under Form 32 is essential for businesses claiming these deductions.
Overview of the Deductions
Section 138: Infrastructure Development
Section 138 provides deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development. This corresponds to the earlier Section 80-IA of the Income Tax Act, 1961.
Section 139: Special Economic Zone Development
Section 139 provides deductions in respect of profits and gains by an undertaking or enterprise engaged in development of Special Economic Zone. This corresponds to the earlier Section 80-IAB.
Section 140: Eligible Start-ups
Section 140 provides special provisions in respect of specified business for eligible start-ups, allowing 100% deduction of profits and gains for three consecutive tax years out of ten years beginning from the year of incorporation.
Section 141: Industrial Undertakings
Section 141 provides deductions in respect of profits and gains from certain industrial undertakings. This corresponds to the earlier Section 80-IB.
Section 142: Housing Projects
Section 142 provides deductions in respect of profits and gains from housing projects. This corresponds to the earlier Section 80-IBA.
Section 143: North-Eastern States
Section 143 provides special provisions in respect of certain undertakings in North-Eastern States, allowing 100% deduction of profits and gains for ten consecutive tax years.
Section 144: Special Economic Zone Units
Section 144 provides special provisions in respect of newly established Units in Special Economic Zones. This corresponds to the earlier Section 10AA.
Form 32: Audit Report Requirements
Rule 66 of the Income Tax Rules, 2026 requires the accounts of the eligible business for the tax year for which the deduction is claimed to be audited by an accountant before the specified date referred to in section 63.
General Requirements
Separate Audit Report: A separate report shall be furnished by each undertaking or enterprise of the assessee claiming deduction.
Accompanying Documents: The report shall be accompanied by the profit and loss account and balance sheet of the undertaking or enterprise as if the undertaking or the enterprise were a distinct entity.
Due Date: The audit report must be furnished before the specified date referred to in section 63.
Section-Specific Requirements
| Section | Relevant Part of Form 32 | Documents to be Attached |
|---|---|---|
| Section 138 (Infrastructure) | Part B2 | Copy of Form No. 10CCB of the Income-tax Rules, 1962 |
| Section 139 (SEZ Developer) | Part B3 | Copy of the notification of the Special Economic Zone (SEZ) |
| Section 140 (Eligible Start-up) | Part B4 | Copy of certificate issued by the Inter-Ministerial Board of Certification |
| Section 141 (Industrial Undertakings) | Part B5 | Copy of approval certificate and completion certificate of the Housing Project, Copy of the notification of the scheme by the Board |
| Section 142 (Housing Projects) | Part B6 | Copy of approval certificate and completion certificate of the Housing Project; Copy of notification issued under Section 80-IBA of the Income-tax Act, 1961 in the case of a Rental Housing Project |
| Section 143 (North-Eastern States) | Part B7 | Copy of the agreement entered into with the Central Government, State Government or a local authority |
| Section 144 (SEZ Units) | Part B8 | Copy of approval certificate and completion certificate |
Key Compliance Requirements
Separate Books of Account
Each undertaking or enterprise claiming deduction must maintain separate books of account. The profit and loss account and balance sheet must be prepared as if the undertaking were a distinct entity.
Timely Filing
The audit report must be furnished by the specified date referred to in section 63. Failure to furnish the audit report on time may result in disallowance of the deduction.
No Double Deduction
If any amount of profits and gains of an undertaking or enterprise is claimed and allowed as a deduction under any of these sections, deduction to the extent of such profits and gains shall not be allowed under any other provision of the Act.
Transition from the 1961 Act
The deductions under Sections 138 to 144 are available for such tax years as would have been allowed under the corresponding provisions of the Income-tax Act, 1961, as if the said Act had not been repealed. This ensures continuity of deductions for businesses that were already eligible under the old regime.
Expert Legal Guidance
Understanding the audit report requirements for deductions under Sections 138 to 144 is essential for businesses claiming these deductions. Anuj Desai & Associates provides expert advisory services on Direct Tax Code compliance, helping businesses prepare Form 32 audit reports and ensure compliance with all conditions.