Tax Exemptions & Deductions for Businesses: Complete Section-by-Section Guide
Taxes are inevitable for businesses. But exemptions and deductions are the legal way to reduce that tax burden. This guide maps 60+ income tax exemptions and deductions across Act 1961 (current for AY 2026-27) and Act 2025 (from AY 2027-28), with conditions, limits, and CBDT references.
Who should read this? Startup founders, SME owners, manufacturing units, consulting firms, export-oriented businesses, real estate developers, healthcare providers, and anyone managing a business across India.
Table of Contents
- General Deductions (Old Regime)
- Business-Specific Exemptions
- Capital Gains Exemptions
- Presumptive Schemes
- Industry-Wise Deductions Grid
- Act 2025 Status Flags
- FAQs
1. General Deductions (Available to Individuals & Businesses, Old Regime Only)
These are available to salaried individuals and business owners in the old tax regime. The new regime does not allow most deductions except a few (marked below).
| Section | Description | Limit / Condition | Act 2025 Status |
|---|---|---|---|
| 80C | Life insurance premium, EPF, PPF, ELSS, NSC, home loan principal, SSY | ₹1.5 lakh combined (HUF/Individual only) | ✅ Section 123 |
| 80CCC | Pension fund contribution | ₹1.5 lakh combined with 80C | ✅ Section 123 |
| 80CCD(1) | NPS Tier-I contribution | ₹1.5 lakh (combined with 80C) | ✅ Section 123 |
| 80CCD(1B) | NPS additional contribution | ₹50,000 (above 80C) | ⚠️ Pending ITD clarity |
| 80D | Health insurance premium (self, spouse, dependents) | ₹25,000 (age <60); ₹50,000 (age 60+); ₹1 lakh (senior parents) | ✅ Section 126 |
| 80E | Education loan interest (higher education) | No limit | Pending mapping |
| 80G | Charitable donations (50% or 100% as per CBDT notification) | 50% or 100% of GTI (eligible donations only) | ✅ Section 354 |
| 80GG | Rent paid (no home of own) | ₹2,500/month or 10% GTI (lower) | Pending mapping |
| 80TTA | Savings account interest | ₹10,000 | Pending mapping |
| 80TTB | Bank deposits/post office savings (senior citizens) | ₹1 lakh (age 60+); ₹50,000 (age 50-59) | Pending mapping |
| 80U | Disability deduction | ₹75,000 (severe); ₹1.25 lakh (profound disability) | Pending mapping |
2. Business-Specific Exemptions (Old Regime)
These exemptions are only for businesses (partnerships, companies, LLPs, sole proprietors). They provide relief on business profits under specific conditions.
| Section | Description | Eligibility & Conditions | Relief / Limit | Act 2025 Status |
|---|---|---|---|---|
| 80-IA | Infrastructure projects (power, ports, highways, parks, SEZ) | New unit; project must satisfy CBDT norms | 100% profits for 10 AYs | ⚠️ Structure changed |
| 80-IAB | SEZ developer deduction | Companies/LLPs only; SEZ development activities | 100% profits for 10 AYs | ⚠️ Structure changed |
| 80-IAC | Eligible startup 100% tax holiday | DPIIT recognition, IMB cert, new plant/machinery, turnover ≤₹100 Cr, incorporated 1-Apr-2016 to 1-Apr-2030, all Indian promoters, no FDI. Private Co/LLP only. | 100% profits for any 3 AYs out of 10 | ✅ Likely carries forward |
| 80IB | Industrial undertakings in backward areas | New industrial unit; specified backward areas only | 30% profits for 5 AYs (full relief for new units 1st 5 AYs) | ⚠️ Pending ITD clarity |
| 80IBA | Housing development deduction | Completion within 5 AYs; affordable housing norms | 100% profits for 5 AYs | ⚠️ Pending ITD confirmation |
| 80JJAA | Employment generation deduction (new employees) | New employees hired; wages >₹2.5L/employee; EPFO registration | 30% of additional wages paid; max ₹3 lakh per employee | ✅ Both regimes (rare) |
3. Capital Gains Exemptions (Both Regimes)
These exemptions on capital gains are available in both old and new tax regimes. They incentivize reinvestment in specified assets.
| Section | Description | Condition | Benefit |
|---|---|---|---|
| 54 | Residential property sale | Reinvest in new residential property within 1 year | Full exemption (both regimes) |
| 54B | Agricultural land sale | Reinvest in new agricultural land within 2 years | Full exemption (both regimes) |
| 54D | Compulsory acquisition of land/building | Reinvest within 2 years | Full exemption (both regimes) |
| 54EC | LTCG invested in NHAI/RECL/HUDCO bonds | Investment within 6 months | Full exemption (both regimes) |
| 54F | Reinvestment in residential property (non-business asset sale) | Reinvest within 2 years; purchase >₹1 crore from proceeds | Full exemption (both regimes) |
| 54GA | Withdrawal from CGAS (Capital Gains Account) | Account closure with Form G | Exemption on accumulated amount (conditions apply) |
4. Presumptive Schemes (Both Regimes) — Deemed Profit
Presumptive schemes allow you to declare profit without detailed accounting. You pay tax on deemed profit (% of turnover), not actual profit. Available in both tax regimes.
| Section | Who | Turnover Limit | Deemed Profit % | Conditions |
|---|---|---|---|---|
| 44AD | Small business (goods/retail/manufacturing) | ≤₹2 crore (≤₹3 Cr from FY 2024-25) | 8% of turnover | Not applicable to professionals; must maintain turnover record |
| 44ADA | Professionals (CA, lawyer, engineer, doctor, etc.) | ≤₹50 lakh | 50% of gross receipts | Professional services only; no detailed records required |
| 44AE | Goods vehicle owner (transport) | ≤₹50 lakh | 7.5% of total receipts | Own/lease vehicles used for transport |
| 44BB | Mining business | No limit | % varies by mineral type (10-20%) | CBDT notification required |
| 44BBA | Aircraft operation | No limit | 5% of gross receipts | Specified aircraft types only |
5. Industry-Wise Deductions Summary Grid
Quick reference: Which exemptions apply to your business?
| Industry | 80-IA | 80-IAC | 80IB | 44AD/44ADA | Section 37 | Capital Gains (54/54EC) |
|---|---|---|---|---|---|---|
| IT/Software Startup | No | ✅ Yes (if eligible) | No | No (turnover >₹50L) | ✅ Yes | ✅ Yes |
| Manufacturing | ✅ If infra | ✅ If startup eligible | ✅ If backward area | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ Yes |
| Export-Oriented (SEZ) | ✅ Yes | No (SEZ-specific) | No | No | ✅ Yes | ✅ Yes |
| Consulting/Professional | No | No | No | ✅ 44ADA (if ≤₹50L) | ✅ Yes | ✅ Yes |
| Healthcare/Hospital | ✅ If infra | No | ✅ If backward area | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ Yes |
| Real Estate/Developer | No | No | No | No (turnover varies) | ✅ Yes | ✅ 54F (reinvest in property) |
| E-Commerce/Retail | No | ✅ If startup eligible | No | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ Yes |
| Agriculture/Agribusiness | No | No | ✅ If backward area | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ 54B (agri land) |
| Pharma/Biotech | ✅ If infra | ✅ If startup eligible | ✅ If backward area | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ Yes |
| Transport/Logistics | No | No | No | ✅ 44AE (vehicles) | ✅ Yes | ✅ Yes |
| Power/Infrastructure | ✅ Yes (primary) | No | No | No | ✅ Yes | ✅ Yes |
| Education/School | ✅ If infra | No | No | ✅ 44AD (if ≤₹2Cr) | ✅ Yes | ✅ Yes |
6. Act 2025 Section Mapping (for AY 2027-28 onwards)
Act 2025 comes into force 1-Apr-2026. For AY 2027-28 onwards (FY 2026-27 income), the old section numbers will be replaced.
Key mappings (pending ITD official notification):
- 80C → Section 123 (consolidates 80C, 80CCC, 80CCD into single schedule)
- 80D → Section 126 (health insurance deduction)
- 80G → Section 354 (charitable donations)
- Section 12AB → Section 332 (charitable trust registration)
- Section 10(23C) → Sections 332 & 334 (charitable exemptions)
- 80-IAC status: ✅ Likely carries forward (pending CBDT clarity)
- 80IB, 80IBA status: ⚠️ Pending ITD confirmation
For more detail, check the official ITD website for section-wise mapping.
7. FAQs
Exemption: Exempts certain income from tax entirely. E.g., agricultural income is fully exempt. Also used for profits exempted under schemes like 80-IAC.
- ✅ DPIIT-recognized startup (on Startup India portal)
- ✅ Indian Monetary Board (IMB) certification (if applicable)
- ✅ New plant/machinery (evidence required)
- ✅ Turnover ≤₹100 crore (in the assessment year)
- ✅ Incorporated between 1-Apr-2016 and 1-Apr-2030
- ✅ All Indian promoters (no FDI)
- ✅ Private Company or LLP only (NOT sole proprietor/partnership)
- Copy of sale deed (old property)
- Proof of investment in new property (within 1 year): purchase deed/agreement, property registered in your name
- Balance sheet showing timing of reinvestment
- ITR filed within due date (original claim must be in ITR)
- ✅ Section 37 (general business expenses)
- ✅ Section 32 (depreciation)
- ✅ Section 36 (interest on borrowed capital)
- ✅ Capital gains exemptions (54, 54B, 54EC, 54F)
- ✅ Section 44AD/44ADA/44AE (presumptive schemes)
- ✅ Section 80JJAA (employment generation)
- ✅ Section 10 (exempt income, including agricultural income)
Disclaimer
This guide is provided for informational purposes and reflects the Income Tax Act 1961 as amended and Income Tax Act 2025 (from 1-Apr-2026). Specific eligibility, conditions, and limits are subject to official CBDT notifications and ITD rulings. This is not a substitute for professional CA advice. Before claiming any exemption or deduction, consult with a qualified Chartered Accountant to verify your eligibility and ensure compliance. Reliance on this guide without professional verification may result in disallowance and penalties.
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