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    Strategic disinvestment: redefined to cover government or public sector share sales reducing majority shareholding and enabling loss carryforward on amalgamation.
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    Exemption for statutory development authorities expanded to cover non-company bodies providing public services, subject to notification.
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    Tax exemption for ODI distributions prevents double taxation, easing IFSC banking unit pass-through of taxed income.
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    Conversion of Gold to Electronic Gold Receipt: excluded from transfer for capital gains; cost basis and holding period preserved.
    Conversion between physical gold and an Electronic Gold Receipt issued by a Vault Manager is proposed to be excluded from the definition of transfer for capital gains. The cost of acquisition of an EGR will be deemed the cost of the underlying gold in the hands of the person in whose name the EGR is issued, and vice versa for gold released against an EGR. The holding period for capital gains will include periods during which the gold or the EGR was held prior to conversion.

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      Comparison of Section 143 "Special provisions in respect of certain undertakings in North-Eastern States." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)

      3 September, 2025

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      Section 143 Special provisions in respect of certain undertakings in North-Eastern States.

      Income-tax Act, 2025

      At a Glance

      This document is the Bill version titled "Clause 143" within the Income Tax Bill, 2025 (old version). It provides special tax relief for specified undertakings in North-Eastern States by allowing a 100% deduction of profits and gains from eligible businesses for ten consecutive tax years starting from the initial tax year. It matters to taxpayers operating eligible businesses/units in the specified North-Eastern States and to the tax administration. Effective date or enactment date: Not stated in the document.

      Background & Scope

      Statutory hooks: Clause 143 (Bill) proposes a special deduction in respect of profits and gains of certain undertakings in the North-Eastern States. The provision references other statutory provisions - notably section 140(4), (5) and (6) (for re-establishment/reconstruction) and the second proviso to section 80-IB(4) of the Income-tax Act, 1961 - for interaction and limiting rules. Coverage: manufacturing/production of "eligible article or thing", substantial expansion of such manufacture/production, and carrying on specified "eligible business". Definitions provided in the clause include "eligible article or thing", "eligible business", "initial tax year", "North-Eastern States" (list of eight states), and "substantial expansion". The clause sets eligibility conditions and prescribes exclusivity of this deduction vis-`a-vis other Chapter deductions.

      Statutory Provision Mode

      Text & Scope

      The clause allows, where gross total income includes profits and gains from a qualifying undertaking carrying on an eligible activity, a deduction equal to 100% of such profits and gains for ten consecutive tax years commencing with the "initial tax year". The clause applies only to undertakings which have, during the period beginning 1 April 2007 and ending with 1 April 2017, begun or begin in any of the specified North-Eastern States to-(a) manufacture/produce an eligible article/thing; (b) undertake substantial expansion to manufacture/produce an eligible article/thing; and (c) carry on an eligible business. The clause imposes pre-conditions on formation: the undertaking must not be formed by splitting up or reconstruction of an existing business; it must not be formed by transfer to a new business of previously used plant/machinery; an express exception to the first condition exists for re-establishment/reconstruction/revival in the circumstances set out in section 140(4).

      Interpretation

      The clause achieves its purpose by setting an unconditional quantitative benefit (100% deduction) subject to temporal, geographic and formation criteria. The text indicates legislative intent to incentivise industrial and service activity in the North-Eastern States for undertakings started in a discrete historical window (2007-2017). The reference to section 140(4) suggests Parliament intended to align the relief with pre-existing rules governing re-established undertakings, preventing arbitrary exclusion. The exclusivity clause (no deduction under any other section of this Chapter in relation to the profits and gains) evinces an intent to avoid double counting of deductions within the same Chapter.

      Exceptions/Provisos

      Carve-outs and conditions in the clause include:

      • Ineligibility where formation is by splitting up or reconstruction of an existing business (subject to the section 140(4) exception).
      • Ineligibility if formed by transferring previously used plant/machinery to new business (with application of section 140(5) and (6)).
      • Exclusion of certain articles: tobacco and manufactured tobacco substitutes (Ch. 24), pan masala (Ch. 21), plastic carry bags under 20 microns (Ministry of Environment notifications cited), and petroleum products (Ch. 27) produced by refineries.
      • Eligible businesses list excludes lower-tier hotels (below two-star), sets capacity thresholds (nursing homes >=25 beds), and prescribes scope for training institutes and IT hardware manufacturing among other items.
      • Aggregate limit: no deduction under this clause or under the second proviso to section 80-IB(4) of the Income-tax Act, 1961 shall together exceed ten tax years.

      Illustrations

      • Example 1: A new two-star hotel in Assam commencing operations in the initial tax year within the specified period would, subject to meeting formation and other conditions, be entitled to claim a 100% deduction of profits for ten consecutive tax years starting that initial tax year. (Facts such as dates or compliance procedures: Not stated in the document.)
      • Example 2: An information-technology hardware manufacturer in Manipur that undertakes a "substantial expansion" (as defined: >=25% increase in plant & machinery book value measured on the first day of that tax year) within the qualifying period would begin the ten-year deduction period from the "initial tax year" defined as the tax year in which substantial expansion is completed.

      Interplay

      The clause expressly invokes sections 140(4)-(6) for treatment of certain formational exceptions and re-established entities, and it cross-refers to the second proviso to section 80-IB(4) of the Income-tax Act, 1961 for aggregate duration limits. No other Rules/Notifications/Circulars are cited in the clause text. Potential interpretive issues (from the text): the precise effect of the cross-reference to section 140 provisions and operationalising the ten consecutive years where an undertaking previously claimed another relief are to be determined by reference to those provisions; the clause itself does not provide procedural rules for claiming the deduction. (Any administrative procedure or forms: Not stated in the document.)

      Differences between the two provisions and practical impact

      • Source/status: Document 1 is presented as "Section 143 of Income-tax Act, 2025" (enacted provision); Document 2 is labelled "Clause 143 of Income Tax Bill, 2025 - Old Version" (bill text).
        • Practical impact: One is framed as enacted legislation, the other as an earlier bill text; enacted text is authoritative. (This observation is drawn from the document headings.)
      • Temporal phrase regarding the terminal date of the eligible period: Document 1 (Act) states the period as "beginning on the 1st April, 2007 and ending before the 1st April, 2017"; Document 2 (Bill) states "beginning on the 1st April, 2007 and ending with the 1st April, 2017."
        • Practical impact: The Act's "ending before" excludes 1 April 2017 as a qualifying date for undertakings that begin on that day; the Bill's "ending with" would include that day. This difference affects the eligibility of undertakings that commenced on 1 April 2017.
      • Condition/exception structure for re-established/reconstructed undertakings: Document 2 separates an explicit clause (3)(c) stating that condition (a) shall not apply to undertakings formed by re-establishment/reconstruction/revival as referred in section 140(4); Document 1 integrates that exception by parenthetical qualification in clause (3)(a) (mirroring section 140(4) language).
        • Practical impact: Substantively similar, but drafting differs-Document 2 expresses the exception as a standalone clause, which may be clearer in the bill form; the Act embeds the exception within clause (3)(a). No clear substantive divergence in eligibility is evident from the texts themselves.
      • Typographical/wording differences: Document 2 contains a typographical truncation ("bio-technolog;") and slightly different punctuation/word order in certain subsections (e.g., placement of commas and "and").
        • Practical impact: Primarily drafting/typographical; the Act text corrects such errors. Absent substantive amendments, these do not alter legal effect other than clarity.
      • Other differences: Document 1 explicitly states "Irrespective of anything contained in this Act" in subsection (6) and adds minor variations in sub-section labeling (e.g., Document 1 uses "(8) For the purposes of this section,-" then lists definitions).
        • Practical impact: Largely stylistic drafting; material coverage of deductions, duration (ten tax years), ineligibility for other chapter deductions, and the list of eligible businesses/articles remain consistent across both texts.

      Practical Implications

      • Compliance and risk areas: Taxpayers must ensure strict compliance with formation criteria (no splitting/reconstruction except as allowed u/s 140(4)), substantiate that plant and machinery are new (or otherwise satisfy section 140(5)/(6) requirements) and document the date of commencement or completion of substantial expansion to establish the "initial tax year". Absent such documentation, entitlement could be contested by the tax authorities. The clause itself does not state procedural safeguards or evidence standards. (Not stated in the document.)
      • Record-keeping/evidence points: Maintain contemporaneous records evidencing commencement dates, investment in plant & machinery (book values), particulars of any reconstruction or re-establishment, and capacity thresholds (e.g., nursing home bed count). Preserve invoices and fixed asset registers to evidence the 25% increase for "substantial expansion". The clause does not set evidentiary standards or audit procedures. (Not stated in the document.)

      Key Takeaways

      • The provision grants a 100% deduction of profits and gains from eligible activities in North-Eastern States for ten consecutive tax years starting from the "initial tax year".
      • Eligibility is confined to undertakings begun (or substantially expanded) within a discrete window (1 April 2007 to 1 April 2017 as per the Bill text) - timing is determinative; any variance in the terminal date materially affects eligibility for undertakings commencing on 1 April 2017.
      • Formation conditions bar benefits to undertakings formed by splitting/reconstruction or by transfer of used plant/machinery, subject to exceptions aligning with section 140 provisions.
      • Certain goods (tobacco, pan masala, specified plastic bags, refinery products) are excluded; the clause specifies a closed list of eligible businesses with capacity/quality thresholds.
      • The deduction is exclusive: no other deduction under the same Chapter can be claimed in relation to the same profits and gains; aggregate relief periods (this clause + section 80-IB(4) second proviso) cannot exceed ten tax years.
      • The Bill text contains minor drafting defects (e.g., "bio-technolog;") and differs from the Act text in a temporal phrase ("ending with" vs "ending before") and in clause structuring; such differences can have concrete eligibility consequences.
      • Procedural, evidentiary and effective date details are not provided in the Bill text. (Not stated in the document.)

      Full Text:

      Section 143 Special provisions in respect of certain undertakings in North-Eastern States.

      Topics

      ActsIncome Tax