Deduction under section 80PA of Income Tax Act, 1961

Deduction under section 80PA of Income Tax Act, 1961

As per the provisions of Section 80PA of the Income Tax Act, 1961, the Producer Company can claim a deduction of an amount equal to 100% of the profits and gains attributable to such business for the previous financial year relevant to an assessment year commencing on or after the 1st day of April, 2019, but before the 1st day of April, 2025 after meeting few conditions.

The assessee (Producer Company) can claim deduction under section 80PA if the following conditions are satisfied;

1. The Assessee is a producer company as defined in section 581A(i) of the Companies Act, 1956 (i.e., a body corporate which deals primarily with the produce of its active members. The objects of the producer company shall relate to all or any of the matters specified in section 581B of the Companies Act, 1956).

(a) Production, harvesting, processing, procurement, grading, pooling, handling, marketing, selling, export of *primary produce of the Members or import of goods or services for their benefit.

(b) Rendering technical services, consultancy services, training, education, research and development and all other activities for the promotion of the interests of its Members;

(c) Generation, transmission and distribution of power, revitalization of land and water resources, their use, conservation and communications relatable to primary produce;

(d) Promoting mutual assistance, welfare measures, financial services, insurance of producers or their primary produce.

2. The total turnover of the company is less than Rs. 100 crores in any previous financial year.

3. Income of the company is inclusive of any profit and gains derived from the eligible business.

4. Eligible business for this purpose is –

(a) The marketing of agricultural produce grown by the members; or

(b) The purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to the members; or

(c) The processing of the agricultural produce of the members.

Understand section 80PA with the help of below illustrative;

   
Turnover of   Eligible Business   
   
Turnover of other   business   
   
Total Turnover   
   
Whether eligible   to claim deduction   
   
Reason   

85 Crores

14 Crores
   
99 Crores   
   
Yes   
   
Total Turnover is less than Rs.100 crores   

70 Crores

32 Crores

102 Crores
   
No   
   
Turnover is more than Rs.100 crores   
   
50 Crores   
   
50 Crores   
   
100 Crores   
   
No   
   
Turnover is not less than Rs.100 crores   
   
NIL   

90 Crores

90 Crores
   
No   
   
Turnover does not include profit derived from eligible business   
   
100 Crores   
   
NIL   
   
100 Crores   
   
No   
   
Turnover is not less than Rs.100 crores   
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