Section 10B — Section 10B — 100 percent EOU (Historic)…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Special provisions in respect of newly established hundred per cent export-oriented undertakings.

10B. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by a

hundred per cent export-oriented undertaking from the export of articles or things or computer software for

a period of ten consecutive assessment years beginning with the assessment year relevant to the previous

year in which the undertaking begins to manufacture or produce articles or things or computer software, as

the case may be, shall be allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits

and gains had not been included by application of the provisions of this section as it stood immediately

before its substitution by the Finance Act, 2000, the undertaking shall be entitled to the deduction referred

to in this sub-section only for the unexpired period of aforesaid ten consecutive assessment years :

Provided further that for the assessment year beginning on the 1st day of April, 2003, the deduction under

this sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of

such articles or things or computer software:

Provided also that no deduction under this section shall be allowed to any undertaking for the assessment

year beginning on the 1st day of April, 2012 and subsequent years :

Provided also that no deduction under this section shall be allowed to an assessee who does not furnish a

return of his income on or before the due date specified under sub-section (1) of section 139.

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it manufactures or produces any articles or things or computer software;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a

result of the re-establishment, reconstruction or revival by the assessee of the business of any such

undertaking as is referred to in section 33B, in the circumstances and within the period specified in

that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any

purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall

apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that

sub-section.

(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software

exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange,

within a period of six months from the end of the previous year or, within such further period as the

competent authority may allow in this behalf.

Explanation 1.—For the purposes of this sub-section, the expression "competent authority" means the

Reserve Bank of India or such other authority as is authorised under any law for the time being in force for

regulating payments and dealings in foreign exchange.

Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in

India where such sale proceeds are credited to a separate account maintained for the purpose by the

assessee with any bank outside India with the approval of the Reserve Bank of India.

(4) For the purposes of sub-section (1), the profits derived from export of articles or things or computer

software shall be the amount which bears to the profits of the business of the undertaking, the same

proportion as the export turnover in respect of such articles or things or computer software bears to the total

turnover of the business carried on by the undertaking.

(5) The deduction under sub-section (1) shall not be admissible for any assessment year beginning on or

after the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, along with the return of

income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288,

certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of

the assessee of the previous year relevant to the assessment year immediately succeeding the last of the

relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall

apply as if every allowance or deduction referred to therein and relating to or allowable for any of

the relevant assessment years ending before the 1st day of April, 2001, in relation to any building,

machinery, plant or furniture used for the purposes of the business of the undertaking in the

previous year relevant to such assessment year or any expenditure incurred for the purposes of

such business in such previous year had been given full effect to for that assessment year itself and

accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of

sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of

sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance

or deduction;

(ii) no loss referred to in sub-section (1) of section 72 or sub-section (1) or sub-section (3) of section

74, in so far as such loss relates to the business of the undertaking, shall be carried forward or

set-off where such loss relates to any of the relevant assessment years ending before the 1st day of

April, 2001;

(iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section

80-IA or section 80-IB in relation to the profits and gains of the undertaking; and

(iv) in computing the depreciation allowance under section 32, the written down value of any asset

used for the purposes of the business of the undertaking shall be computed as if the assessee had

claimed and been actually allowed the deduction in respect of depreciation for each of the relevant

assessment year.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in

relation to the undertaking referred to in this section as they apply for the purposes of the undertaking

referred to in section 80-IA.

(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is

transferred, before the expiry of the period specified in this section, to another Indian company in a scheme

of amalgamation or demerger—

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company

for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or resulting

company as they would have applied to the amalgamating or the demerged company if the

amalgamation or the demerger had not taken place.

(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee,

before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the

Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to

him, the provisions of this section shall not apply to him for any of the relevant assessment year.

(9) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

(9A) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 1.— [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 2.—For the purposes of this section,—

(i) "computer software" means—

(a) any computer programme recorded on any disc, tape, perforated media or other

information storage device; or

(b) any customized electronic data or any product or service of similar nature as may be

notified by the Board,

which is transmitted or exported from India to any place outside India by any means;

(ii) "convertible foreign exchange" means foreign exchange which is for the time being treated by the

Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange

Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding

law for the time being in force;

(iii) "export turnover" means the consideration in respect of export by the undertaking of articles or

things or computer software received in, or brought into, India by the assessee in convertible

foreign exchange in accordance with sub-section (3), but does not include freight,

telecommunication charges or insurance attributable to the delivery of the articles or things or

computer software outside India or expenses, if any, incurred in foreign exchange in providing the

technical services outside India;

(iv) "hundred per cent export-oriented undertaking" means an undertaking which has been approved as

a hundred per cent export-oriented undertaking by the Board appointed in this behalf by the

Central Government in exercise of the powers conferred by section 14 of the Industries

(Development and Regulation) Act, 1951 (65 of 1951), and the rules made under that Act;

(v) "relevant assessment years" means any assessment years falling within a period of ten consecutive

assessment years, referred to in this section.

Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on

site development of computer software (including services for development of software) outside India shall

be deemed to be the profits and gains derived from the export of computer software outside India.

Explanation 4.—For the purposes of this section, "manufacture or produce" shall include the cutting and

polishing of precious and semi-precious stones.

Special provisions in respect of export of certain articles or things.

Function in the statutory architecture

Section 10B allowed a deduction of the profits and gains derived by a hundred per cent export-oriented undertaking from the export of articles or things or computer software, for ten consecutive assessment years beginning with the year in which it began to manufacture or produce. Such an undertaking is one approved by the Board appointed under section 14 of the Industries (Development and Regulation) Act, 1951. For AY 2003-04 the deduction was ninety per cent of export profits.

The undertaking had to manufacture or produce articles or things or computer software, and could not be formed by splitting up or reconstruction of an existing business or by transfer of used machinery or plant. Sale proceeds had to be brought into India in convertible foreign exchange within six months from the end of the previous year, or a further allowed period. A return by the due date under s. 139(1) and an accountant’s report with the return were conditions.

Operative consequences

Export profits were the proportion of business profits that export turnover bore to total turnover (sub-section (4)).
Losses of relevant years ending before 1-4-2001 could not be carried forward or set off, and written down value is computed as if depreciation had been allowed (sub-section (6)).
No deduction under ss. 80HH, 80HHA, 80-I, 80-IA or 80-IB was allowed on the same profits (sub-section (6)(iii)).
On amalgamation or demerger, the deduction passed to the amalgamated or resulting company (sub-section (7A)).

Status

The section is not operative for AY 2026-27. The third proviso to sub-section (1) states that no deduction “shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2012 and subsequent years”. Sub-sections (9) and (9A) read “[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]”. The Finance Act, 2026 does not amend this section.

The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject there is no provision in the Income-tax Act, 2025.

Case law on Section 10B

ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 10B(1) — deduction of export profits of a hundred per cent export-oriented undertaking	No corresponding provision in the Income-tax Act, 2025
s. 10B(6) — restrictions on losses, allowances and Chapter VI-A deductions after the tax holiday	No corresponding provision in the Income-tax Act, 2025