Income Tax Act 2025: Section 527 for Tax Year 2025-26

Power to make exemption, etc., in relation to participation in business of prospecting for, extraction, etc., of mineral oils

[As per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 527(1) of Income Tax Act 2025

527(1) If the Central Government is satisfied that it is necessary or expedient in the public interest, it may, by notification, make an exemption, reduction in rate, or other modification of income-tax for any class of persons specified in sub-section (2) or in regard to the whole or any part of the income of such class of persons or the status in which such class of persons or the members thereof are to be assessed on their income from the business referred to in sub-section (2)(a), effective from tax year beginning on or after 1st April, 1992.

Section 527(2) of Income Tax Act 2025

527(2) The persons referred to in sub-section (1) shall be the following:—

• 527(2)(a) persons with whom the Central Government has entered into agreements for the association or participation of that Government, or any person authorised by that Government in any business of prospecting for or extraction or production of mineral oils;
• 527(2)(b) persons providing any services or facilities or supplying any ship, aircraft, machinery or plant (whether by sale or hire) for any business consisting of the prospecting for or extraction or production of mineral oils carried on by that Government, or any person specified by that Government by notification; and
• 527(2)(c) employees of the persons referred to in clause (a) or (b).

Section 527(3) of Income Tax Act 2025

527(3) Every notification issued under this section shall be laid before each House of Parliament.

Section 527(4) of Income Tax Act 2025

527(4) In this section,—

• 527(4)(a) “mineral oil” includes petroleum and natural gas;
• 527(4)(b) “status” means the category of person as defined in section 2(77) under which the assessee is assessed.

FAQs on Section 527 of the Income Tax Act, 2025

1. What is Section 527 of the Income Tax Act, 2025?
   • Section 527 grants the Central Government the power to exempt, reduce, or modify income tax for certain persons involved in the business of prospecting, extracting, or producing mineral oils.
2. When does Section 527 come into effect?
   • This section applies from 1st April, 2026, but the exemptions or modifications can be made for incomes from 1st April, 1992, onwards.
3. What does “mineral oil” include under this section?
   • Mineral oil includes petroleum and natural gas.
4. What does “status” mean in this section?
   • “Status” refers to the category of persons as defined in Section 2(77) of the Income Tax Act, under which an assessee is assessed.
5. Who can benefit from exemptions under Section 527?
   • The following categories of persons can benefit:
     • Those with agreements with the Central Government for participation in mineral oil businesses.
     • Those providing services, facilities, or equipment (such as ships, aircraft, or machinery) for mineral oil extraction.
     • Employees of the above categories.
6. Does Section 527 apply to private companies?
   • Yes, if they have a formal agreement with the Central Government for mineral oil exploration, extraction, or production.
7. Are employees of these companies eligible for tax exemptions?
   • Yes, employees of companies covered under Section 527(2)(a) and 527(2)(b) may also receive exemptions.
8. How does the Central Government grant exemptions under this section?
   • The government issues a notification specifying the exemption, reduction, or modification in tax rates.
9. Where are these notifications published?
   • Every notification issued under Section 527 must be laid before each House of Parliament for review.
10. Can the government modify existing exemptions?
    • Yes, the government can alter or withdraw exemptions through a fresh notification.
11. What is the significance of the retrospective date (1st April, 1992)?
    • It allows businesses and employees to claim exemptions for past tax years if they qualify under Section 527.
12. Does this section apply to foreign companies operating in India?
    • Yes, if they have agreements with the Central Government or are providing equipment/services for mineral oil extraction.
13. Are there any conditions to claim benefits under this section?
    • Yes, entities and individuals must meet the conditions set out in the government notification.

Section 527 of the Income Tax Act, 2025, empowers the Central Government to grant exemptions, reductions, or modifications in income tax for entities involved in the prospecting, extraction, or production of mineral oils, including petroleum and natural gas. Eligible beneficiaries include companies with government agreements, service providers supplying equipment or facilities, and their employees.

These exemptions can apply retrospectively from 1st April, 1992. The government must issue notifications detailing such exemptions, which are subject to parliamentary review. The provision ensures tax relief for businesses and individuals contributing to India’s mineral oil sector.