Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.
[Section-138 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
In respect of any tax year beginning on or after the 1st April, 2026, where––
- (a) the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in section 80-IA of the Income-tax Act, 1961; and
- (b) such assessee is eligible to claim a deduction from the profits and gains derived from such business for such tax year under the provisions of the said section, if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction from the profits and gains derived from such business, subject to the conditions that—
- (i) the amount of deduction is calculated as per the provisions of section 80-IA of the Income-tax Act,1961; and
- (ii) the deduction under this Act shall be allowed only for such tax years, as would have been allowed under section 80-IA of the Income-tax Act,1961, as if the said Act had not been repealed.
FAQs on Section 138 of Income Tax Act 2025
What is Section 138 of the Income Tax Act, 2025 about?
Section 138 provides for deductions in respect of profits and gains derived from specified industrial undertakings or enterprises engaged in infrastructure development, based on conditions derived from the repealed section 80-IA.
From which date does Section 138 come into effect?
Section 138 is applicable from the tax year beginning on or after 1st April, 2026.
Who is eligible to claim deduction under Section 138?
An assessee whose gross total income includes profits and gains derived from a business referred to in section 80-IA of the repealed Income-tax Act, 1961, and who would have been eligible to claim a deduction under that section if the said Act had not been repealed.
What type of businesses qualify for deduction under Section 138?
Businesses that were covered under section 80-IA of the Income-tax Act, 1961, such as those involved in infrastructure development, industrial parks, power generation, transmission or distribution, etc.
How is the deduction amount determined under Section 138?
The deduction is calculated as per the provisions of section 80-IA of the Income-tax Act, 1961, as if that Act were still in force.
Is the deduction available for all years starting from 2026-27?
No, the deduction is allowed only for such tax years as would have been allowed under section 80-IA of the Income-tax Act, 1961, had it not been repealed.
Can a new business claim deduction under Section 138 if it starts after 1st April, 2026?
No, only those businesses that would have been eligible under section 80-IA of the repealed Act are entitled to deduction under this section.
Is a fresh application or approval required under this Act to claim the deduction?
The section does not specify any fresh approval requirement under this Act but presumes eligibility under the repealed provisions.
Does the deduction apply automatically once eligibility is confirmed?
Yes, if the assessee meets the conditions specified under section 80-IA as if it had not been repealed, the deduction under Section 138 is allowed.
Is there any sunset period or maximum time limit for availing the deduction under Section 138?
Yes, the deduction is available only for the number of years for which it would have been allowed under the repealed section 80-IA.
Can a business unit that already exhausted its 80-IA deduction period continue to claim under Section 138?
No, if the eligible deduction period under section 80-IA has already lapsed, no deduction is available under Section 138.
Will the deduction under Section 138 reduce the total income for tax calculation?
Yes, the deduction is allowed while computing total income and hence reduces the taxable income.
Are there any specific conditions or documentation required to support the claim?
While the section does not elaborate, compliance with the conditions that were applicable under section 80-IA (like audit report, commencement date, etc.) is presumed necessary.
Can the deduction be claimed under both Section 138 and any other section of this Act?
No, double deduction for the same income is not permissible; if a deduction is claimed under Section 138, it cannot be claimed again under any other section.
Is Section 138 a transitional provision?
Yes, it acts as a transitional provision to allow continuity of deduction benefits previously available under the repealed section 80-IA.
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