Section 80LA gives a deduction from specified income of two classes of assessee. Under sub-section (1), a scheduled bank, or a bank incorporated outside India, having an Offshore Banking Unit in a Special Economic Zone gets one hundred per cent of the income for five consecutive assessment years from the year of permission under section 23(1)(a) of the Banking Regulation Act, 1949 (or registration under the SEBI Act, 1992 or other law), and then fifty per cent for five more. A proviso raises the second-stage figure to one hundred per cent for assessment year 2023-24 onwards.
Under sub-section (1A), a Unit of an International Financial Services Centre gets one hundred per cent of the income for any ten consecutive assessment years, at its option, out of fifteen years beginning with the year of the permission or registration (including registration under the International Financial Services Centres Authority Act, 2019).
Eligible income under sub-section (2) is income from the Offshore Banking Unit, from banking business with Special Economic Zone units or developers, from the approved business of an IFSC Unit, and from transfer of an aircraft or ship leased by an IFSC Unit.
Operative consequences
No deduction is allowed unless the return is accompanied by an accountant's report in the specified form and a copy of the permission or registration (sub-section (3)).
For an IFSC Unit the ten years are chosen by the assessee within the fifteen-year window, and aircraft or ship transfer income qualifies only if the unit began operations by 31 March 2030.
Being a deduction under heading C of Chapter VI-A, it is allowed only if the return is furnished on or before the due date under s. 139(1) (s. 80AC).
Status
Operative for assessment year 2026-27. The 2030 date in sub-section (2)(d) carries the note "Sub. for '2025' by Act No. 7 of 2025, w.e.f. 1-4-2025". The Finance Act, 2026 does not amend s. 80LA. Its changes are to s. 147 of the 2025 Act: twenty consecutive tax years for an Offshore Banking Unit (with a further ten tax years from 1 April 2026 where the tenth year under s. 80LA(1) ended on 31 March 2025), twenty out of twenty-five for an IFSC Unit, and a bar on new units formed by splitting up or reconstruction.
The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act provision is s. 147.
Case Laws & Commentary
SECTION 80LA — DEDUCTIONS IN RESPECT OF CERTAIN INCOMES OF OFFSHORE BANKING UNITS AND UNITS OF AN INTERNATIONAL FINANCIAL SERVICES CENTRE
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre.
Section 80LA allows a scheduled bank (or a foreign bank) having an Offshore Banking Unit in a Special Economic Zone, and a Unit of an International Financial Services Centre (IFSC), and specified IFSC entities, a deduction in respect of the specified income from the eligible business. For an IFSC Unit the deduction is 100 per cent of such income for any ten consecutive assessment years out of fifteen, at the Unit's option, subject to the prescribed permission/registration and the audit-report condition. The tax holiday for Offshore Banking Units is the subject of the Finance Act, 2026 extension.
A. SECTION COMMENTARY
A.1 Structural position
Section 80LA is the deduction for Offshore Banking Units and International Financial Services Centre Units — a cornerstone of the GIFT-City / IFSC tax framework. It is a live, policy-prominent deduction and is directly affected by the Finance Act, 2026.
A.2 Provision taxonomy
A 100-per-cent deduction (for IFSC Units, ten consecutive years out of fifteen at the Unit's option) on the specified income from the eligible business, conditioned on the requisite permission/registration (Banking Regulation Act / SEBI / IFSCA) and a report of an accountant; with a separate, time-bounded regime for Offshore Banking Units.
A.3 Core doctrinal themes
The operative questions are the eligibility of the unit (OBU in an SEZ / IFSC Unit), the specified income that qualifies, the option year and ten-out-of-fifteen-year computation, and the permission / audit conditions. The dominant current development is legislative — the Finance Act, 2026 extension of the OBU tax holiday.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 2005 and progressively expanded as the IFSC regime developed (the ten-out-of-fifteen-year IFSC-Unit holiday was provided by the Finance Act, 2016). The FINANCE ACT, 2026 has extended the tax holiday for Offshore Banking Units from ten years to twenty years, materially enlarging the OBU incentive. This is one of the headline Chapter VIA changes made by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Confirm the unit's status (OBU in an SEZ / IFSC Unit) and the requisite permission/registration. (2) For IFSC Units, choose the ten consecutive holiday years within the fifteen-year block to maximise relief. (3) Note the Finance Act, 2026 extension of the OBU holiday to twenty years. (4) File the accountant's report and the return by the section 80AC due date. (5) Map the section 80LA deduction against the concessional IFSC rate / exemption framework to avoid double counting.
B. FA 2026 IMPACT NOTE
Section 80LA IS AFFECTED by the Finance Act, 2026: the tax holiday for Offshore Banking Units has been extended from ten years to twenty years, significantly enlarging the OBU incentive within the IFSC / GIFT-City framework. This is one of the headline Chapter VIA measures in the Finance Act, 2026.
The IFSC-Unit deduction (100 per cent for ten consecutive years out of fifteen) continues, subject to the section 80AC due-date condition.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Eligibility, specified income and the FA 2026 OBU extension
Statutory scheme of section 80LA (developing case law)
Facts: An Offshore Banking Unit / IFSC Unit claims the deduction on its specified income.
Issue: What governs eligibility, quantum and the holiday period, and what has changed under the Finance Act, 2026.
Held: Eligibility turns on the unit's status and the requisite permission/registration; the deduction is 100 per cent of the specified income (for an IFSC Unit, for ten consecutive years out of fifteen at the Unit's option); and, under the Finance Act, 2026, the Offshore Banking Unit tax holiday is extended from ten to twenty years. The accountant's report and the section 80AC due date are conditions.
Ratio: A unit-status- and income-specific 100-per-cent deduction, with the OBU holiday now extended to twenty years by the Finance Act, 2026.
Relevance: States the operative framework for a live, policy-prominent deduction and records the Finance Act, 2026 OBU extension; section-specific appellate authority is still developing.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. Digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR). For spent or lightly-litigated provisions, the scarcity is stated candidly and the governing statutory material is given.
Function in the statutory architecture
Section 80LA gives a deduction from specified income of two classes of assessee. Under sub-section (1), a scheduled bank, or a bank incorporated outside India, having an Offshore Banking Unit in a Special Economic Zone gets one hundred per cent of the income for five consecutive assessment years from the year of permission under section 23(1)(a) of the Banking Regulation Act, 1949 (or registration under the SEBI Act, 1992 or other law), and then fifty per cent for five more. A proviso raises the second-stage figure to one hundred per cent for assessment year 2023-24 onwards.
Under sub-section (1A), a Unit of an International Financial Services Centre gets one hundred per cent of the income for any ten consecutive assessment years, at its option, out of fifteen years beginning with the year of the permission or registration (including registration under the International Financial Services Centres Authority Act, 2019).
Eligible income under sub-section (2) is income from the Offshore Banking Unit, from banking business with Special Economic Zone units or developers, from the approved business of an IFSC Unit, and from transfer of an aircraft or ship leased by an IFSC Unit.
Operative consequences
Status
Operative for assessment year 2026-27. The 2030 date in sub-section (2)(d) carries the note "Sub. for '2025' by Act No. 7 of 2025, w.e.f. 1-4-2025". The Finance Act, 2026 does not amend s. 80LA. Its changes are to s. 147 of the 2025 Act: twenty consecutive tax years for an Offshore Banking Unit (with a further ten tax years from 1 April 2026 where the tenth year under s. 80LA(1) ended on 31 March 2025), twenty out of twenty-five for an IFSC Unit, and a bar on new units formed by splitting up or reconstruction.
The 1961 Act governs assessment year 2026-27 and earlier years; the Income-tax Act, 2025 governs tax year 2026-27 onwards, and for this subject the 2025 Act provision is s. 147.
Case Laws & Commentary
SECTION 80LA — DEDUCTIONS IN RESPECT OF CERTAIN INCOMES OF OFFSHORE BANKING UNITS AND UNITS OF AN INTERNATIONAL FINANCIAL SERVICES CENTRE
Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)
STATUTORY SCHEME (editorial summary — verbatim bare-Act text in the companion Block-1 file)
Marginal heading: Deductions in respect of certain incomes of Offshore Banking Units and International Financial Services Centre.
Section 80LA allows a scheduled bank (or a foreign bank) having an Offshore Banking Unit in a Special Economic Zone, and a Unit of an International Financial Services Centre (IFSC), and specified IFSC entities, a deduction in respect of the specified income from the eligible business. For an IFSC Unit the deduction is 100 per cent of such income for any ten consecutive assessment years out of fifteen, at the Unit's option, subject to the prescribed permission/registration and the audit-report condition. The tax holiday for Offshore Banking Units is the subject of the Finance Act, 2026 extension.
A. SECTION COMMENTARY
A.1 Structural position
Section 80LA is the deduction for Offshore Banking Units and International Financial Services Centre Units — a cornerstone of the GIFT-City / IFSC tax framework. It is a live, policy-prominent deduction and is directly affected by the Finance Act, 2026.
A.2 Provision taxonomy
A 100-per-cent deduction (for IFSC Units, ten consecutive years out of fifteen at the Unit's option) on the specified income from the eligible business, conditioned on the requisite permission/registration (Banking Regulation Act / SEBI / IFSCA) and a report of an accountant; with a separate, time-bounded regime for Offshore Banking Units.
A.3 Core doctrinal themes
The operative questions are the eligibility of the unit (OBU in an SEZ / IFSC Unit), the specified income that qualifies, the option year and ten-out-of-fifteen-year computation, and the permission / audit conditions. The dominant current development is legislative — the Finance Act, 2026 extension of the OBU tax holiday.
A.4 Legislative evolution / FA amendment trail
Inserted by the Finance Act, 2005 and progressively expanded as the IFSC regime developed (the ten-out-of-fifteen-year IFSC-Unit holiday was provided by the Finance Act, 2016). The FINANCE ACT, 2026 has extended the tax holiday for Offshore Banking Units from ten years to twenty years, materially enlarging the OBU incentive. This is one of the headline Chapter VIA changes made by the Finance Act, 2026.
A.5 CA practitioner pointers
(1) Confirm the unit's status (OBU in an SEZ / IFSC Unit) and the requisite permission/registration. (2) For IFSC Units, choose the ten consecutive holiday years within the fifteen-year block to maximise relief. (3) Note the Finance Act, 2026 extension of the OBU holiday to twenty years. (4) File the accountant's report and the return by the section 80AC due date. (5) Map the section 80LA deduction against the concessional IFSC rate / exemption framework to avoid double counting.
B. FA 2026 IMPACT NOTE
Section 80LA IS AFFECTED by the Finance Act, 2026: the tax holiday for Offshore Banking Units has been extended from ten years to twenty years, significantly enlarging the OBU incentive within the IFSC / GIFT-City framework. This is one of the headline Chapter VIA measures in the Finance Act, 2026.
The IFSC-Unit deduction (100 per cent for ten consecutive years out of fifteen) continues, subject to the section 80AC due-date condition.
C. CASE LAW — CLUSTERED BY ISSUE
Cluster C-1 : Eligibility, specified income and the FA 2026 OBU extension
Statutory scheme of section 80LA (developing case law)
Facts: An Offshore Banking Unit / IFSC Unit claims the deduction on its specified income.
Issue: What governs eligibility, quantum and the holiday period, and what has changed under the Finance Act, 2026.
Held: Eligibility turns on the unit's status and the requisite permission/registration; the deduction is 100 per cent of the specified income (for an IFSC Unit, for ten consecutive years out of fifteen at the Unit's option); and, under the Finance Act, 2026, the Offshore Banking Unit tax holiday is extended from ten to twenty years. The accountant's report and the section 80AC due date are conditions.
Ratio: A unit-status- and income-specific 100-per-cent deduction, with the OBU holiday now extended to twenty years by the Finance Act, 2026.
Relevance: States the operative framework for a live, policy-prominent deduction and records the Finance Act, 2026 OBU extension; section-specific appellate authority is still developing.
Editorial note on sourcing
Editorial scheme summary prepared from the Income-tax Act, 1961 as amended by the Finance Act, 2025, read with the Finance Act, 2026; verbatim bare-Act text is carried in the companion Block-1 treatise file. Digested authorities are reported Supreme Court / High Court decisions verified against standard law reports (ITR/Taxman/CTR). For spent or lightly-litigated provisions, the scarcity is stated candidly and the governing statutory material is given.