What is Section 80 Deductions?
Chapter VI-A of the Income Tax Act 1961 (Sections 80C to 80U) provides deductions from gross total income for companies and individuals. For companies, the most relevant deductions are Section 80G (donations to approved funds/institutions — 50% to 100%), Section 80IC/80IE (profits from businesses in specified areas — North East India, Himachal Pradesh), Section 80JJAA (additional deduction for new employee costs, 30% of additional wages for 3 years), and Section 80-IAC (Startup India — 3 years tax holiday for eligible startups). Companies opting for Section 115BAA (22% rate) cannot claim most Section 80 deductions except 80JJAA and 80G.
Current Rate (FY 2025-26 (AY 2026-27))
Varies: 80G donations up to 100% deductible (subject to conditions); 80JJAA: 30% of additional wages for new employees; 80-IAC: 100% of profits for any 3 years out of 10 consecutive years.
Example
A startup incorporated in 2023 with DPIIT recognition and turnover below INR 100 crore claims 100% deduction under Section 80-IAC on INR 50 lakh profit. Tax saved at 30% rate = INR 15 lakh for the applicable year. Alternatively, under 115BAA, no 80-IAC is available but the 22% rate may still be lower effective than 30% with 80-IAC.
How Section 80 Deductions works in India
Section 80 deductions reduce the taxable income of a company, but their availability depends heavily on which tax regime the company has opted for.
**Section 80 deductions available to companies under 115BAA (22% regime)**
- **Section 80JJAA:** 30% deduction on additional wages paid to new employees (workers earning up to INR 25,000/month, employed for 240+ days). Available for 3 years. Useful for labour-intensive businesses. - **Section 80G:** Donations to approved charitable institutions and funds. 100% or 50% deductible depending on the institution. Requires Form 10BE from the donee institution.
**Section 80 deductions only under old regime (30% base rate)**
- **Section 80-IAC:** 100% profit deduction for DPIIT-recognised startups for any 3 consecutive years out of the first 10 years of incorporation (for companies incorporated between 1 April 2016 and 31 March 2025). Requires DPIIT approval and turnover below INR 100 crore. - **Section 80IC:** 25-100% deduction for companies in Himachal Pradesh, Uttarakhand, North-East, or Sikkim. Most incentives have sunset but some older claims are grandfathered. - **Section 80P:** Cooperative societies — deduction on profits (not applicable to companies).
**Practical implication**
A startup with INR 50 lakh profit comparing regimes: - Old regime (30%): 80-IAC deduction = INR 0 taxable income = INR 0 tax (but MAT at 15% may apply) - 115BAA (22%): Full profit taxable = ~INR 12.6 lakh tax
For high-profit startups in early years, the old regime with 80-IAC can yield lower effective tax. For mature companies, 115BAA at 22% is typically better. Consult a CA before the first ITR.
**Note on MAT interaction**
Under the old regime, even with 80-IAC reducing taxable income to zero, the company may still owe Minimum Alternate Tax (MAT) at 15% of book profit. Startups should model both scenarios.
Related terms
India levies Corporate Income Tax on the net profits of companies registered under the Companies Act 2013. The headline rate for domestic companies is 30%, but the effective rate for most companies is 22% under the concessional Section 115BAA regime (plus 10% surcharge and 4% cess = ~25.17%). New manufacturing companies incorporated after 1 October 2019 and commencing production before 31 March 2024 can opt for 15% under Section 115BAB (plus surcharge and cess = ~17.01%).
ITR-6 is the Income Tax Return form applicable to all companies registered under the Companies Act 2013 (and foreign companies) that do not claim exemption under Section 11 (religious/charitable trusts). It must be filed electronically by 31 October of the assessment year (30 November if the company has international/specified domestic transactions subject to transfer pricing audit). The return must be verified using Digital Signature Certificate (DSC) of a director.
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