Housing Project and North-East Undertaking Deductions: Sections 142 and 143 of the Income Tax Act 2025

Two profit-linked deductions in the Income Tax Act 2025 are legacy provisions that only help assessees who already qualified under the 1961 Act. Section 142 gives a deduction on profits from developing housing projects and rental housing projects, worked out exactly as section 80-IBA of the 1961 Act would have allowed. Section 143 gives a 100% deduction for ten consecutive tax years to certain undertakings that started in the North-Eastern States between 1 April 2007 and 31 March 2017.

This guide explains who these sections reach, how the deduction is computed, what cannot be claimed alongside it, and the audit report (Form 32) that every claim needs. Every point below comes from the Act as amended by the Finance Act, 2026, and the Income-tax Rules, 2026. Last reviewed against that text on 10 November 2026.

What does section 142 allow for housing projects?

Section 142 applies when two things are true for a tax year:

• your gross total income includes profits and gains from the business of developing and building housing projects or rental housing projects referred to in section 80-IBA of the Income-tax Act, 1961; and
• you are eligible to claim a deduction on those profits for that tax year under section 80-IBA, as if the 1961 Act had not been repealed.

If both hold, you get a deduction from those profits, subject to two conditions in section 142:

1. the amount is calculated as per section 80-IBA of the 1961 Act; and
2. the deduction is allowed only for the tax years in which section 80-IBA would have allowed it, as if the 1961 Act were still in force.

So section 142 does not set its own rate, project size, time limit or approval test. It points back to section 80-IBA of the 1961 Act. Those 80-IBA conditions are not reproduced in the 2025 Act, so read them from the 1961 Act text before you claim. This article does not restate them.

What does section 143 allow for North-Eastern undertakings?

Under section 143(1), where your gross total income includes profits and gains derived by a qualifying undertaking from a business listed in section 143(2), you get a deduction of 100% of those profits for ten consecutive tax years, starting from the "initial tax year".

Section 143(2) covers an undertaking that, in any North-Eastern State, between 1 April 2007 and the day before 1 April 2017, began or begins to:

• manufacture or produce any eligible article or thing; or
• carry out a substantial expansion to manufacture or produce an eligible article or thing; or
• carry on an eligible business.

Which states count as North-Eastern States?

Section 143(8)(d): Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura.

What is an "eligible article or thing"?

Anything, except the four exclusions in section 143(8)(a):

• tobacco and manufactured tobacco substitutes (Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985);
• pan masala (Chapter 21 of that Schedule);
• plastic carry bags of less than twenty microns, as specified in the two Ministry of Environment and Forests notifications named in the clause; and
• goods of Chapter 27 of that Schedule produced by petroleum oil or gas refineries.

What is an "eligible business"?

Section 143(8)(b) lists only these:

• a hotel (not below two star category);
• adventure and leisure sports, including ropeways;
• a nursing home providing medical and health services with a minimum capacity of twenty-five beds;
• an old-age home;
• a vocational training institute for hotel management, catering and food craft, entrepreneurship development, nursing and para-medical, civil aviation related training, fashion designing and industrial training;
• an information technology related training centre;
• manufacturing of information technology hardware; and
• bio-technology.

How do I check whether an undertaking qualifies under section 143?

Steps 4 and 5 come from section 143(3). There are exceptions to both, covered next.

What are the exceptions for reconstruction and used plant?

Section 143(3)(a) allows one exception to the "no reconstruction" rule: an undertaking formed by re-establishing, reconstructing or reviving a business discontinued after extensive damage to its building, machinery, plant or furniture. The damage must be a direct result of a natural convulsion (flood, typhoon, hurricane, cyclone, earthquake), riot or civil disturbance, accidental fire or explosion, or action by or against an enemy. The revival must happen before three years from the end of the tax year of discontinuance (section 140(4), applied by section 143(3)(a)).

For the used-plant condition, section 143(4) applies section 140(5) and (6):

• imported machinery or plant that was used outside India by someone else is not "previously used" if it was never used in India before installation, it is imported into India, and no depreciation was allowed or allowable on it before installation (section 140(5)); and
• if previously used machinery or plant transferred to the new business is not more than 20% of the total value of the machinery and plant used in the business, the condition is treated as met (section 140(6)).

What is "substantial expansion" and "initial tax year"?

Section 143(8)(e) defines substantial expansion as an increase in investment in plant and machinery by at least 25% of the book value of plant and machinery (before depreciation in any year) as on the first day of the tax year in which the expansion is undertaken.

Section 143(8)(c) defines the initial tax year as the tax year in which the undertaking begins to manufacture or produce, or completes the substantial expansion. The ten-year clock starts there.

Worked example 1: does an expansion count as substantial?

Assumptions: a Meghalaya manufacturer expanded within the 2007-2017 window. Plant and machinery has a book value, before any depreciation, of Rs 8,00,00,000 on the first day of the tax year of expansion. Figures are illustrative.

Step	Working	Result
1. Threshold	25% x Rs 8,00,00,000	Rs 2,00,00,000
2. Case A: new investment Rs 1,80,00,000	1,80,00,000 is less than 2,00,00,000	Not a substantial expansion
3. Case B: new investment Rs 2,00,00,000	2,00,00,000 is at least 2,00,00,000	Substantial expansion

Worked example 2: how is the 143(1) deduction computed?

Assumptions: Meena runs a hotel (three star) in Sikkim as an eligible business. Her undertaking began in tax year 2014-15, which we treat as the first year of her ten-year period (section 143(8)(c) defines the initial tax year only by reference to manufacture or production and substantial expansion, so for a hotel confirm the starting year from the facts). In one year inside the ten-year period she has Rs 40,00,000 of profits from the hotel and Rs 10,00,000 of profits from a separate trading business. Other deductions are ignored. Figures are illustrative.

Step	Working	Amount (Rs)
1. Hotel profits	As computed for the undertaking	40,00,000
2. Other business profits	Trading business	10,00,000
3. Gross total income	40,00,000 + 10,00,000	50,00,000
4. Deduction under 143(1)	100% x 40,00,000	40,00,000
5. Total income	50,00,000 - 40,00,000	10,00,000

The deduction covers only the undertaking's profits. The trading profits stay fully in the total income.

For which tax years can section 143 still apply?

Section 143(1) allows ten consecutive tax years from the initial tax year. Because section 143(2) closes on 31 March 2017, an undertaking that began production in the window has an initial tax year no later than 2016-17, which gives a last deduction year of 2025-26. The initial tax year can fall later where a substantial expansion started in the window is completed afterwards, so confirm the dates against the facts of your own case.

Initial tax year	Ten consecutive tax years
2010-11	2010-11 to 2019-20
2014-15	2014-15 to 2023-24
2016-17 (latest possible)	2016-17 to 2025-26

In practice, section 143 matters today for pending assessments, revised or belated returns, and records of earlier years. Section 142 depends on how long section 80-IBA would have allowed the deduction.

Can I claim other deductions on the same profits?

Not under section 143. Section 143(5) says that, whatever the rest of the Act provides, no deduction is allowed under any other section of this Chapter on the undertaking's profits and gains.

Section 143(6) adds a ten-year ceiling across two provisions. No deduction is allowed under section 143 if the total period of deduction, taking section 143 together with the second proviso to section 80-IB(4) of the 1961 Act, exceeds ten tax years.

Worked example 3: the ten-year ceiling in section 143(6)

Assumption: an undertaking has already had four tax years of deduction under the second proviso to section 80-IB(4) of the 1961 Act. Figures are illustrative.

Step	Working	Result
1. Ceiling	Section 143(6)	10 tax years in total
2. Already used	Under 80-IB(4) second proviso	4 tax years
3. Left for section 143	10 - 4	6 tax years

Section 143(7) also applies section 140(7) to (15) to these undertakings, as far as may be. Those sub-sections cover how profits are computed (as if the eligible business were your only source of income), market-value pricing for transfers of goods or services between the eligible business and your other businesses, adjustment of profits where close connection produces more than ordinary profits, and the Central Government's power to withdraw the benefit for a class of undertaking by notification.

What is the compliance step for both sections?

Rule 66 of the Income-tax Rules, 2026 covers sections 142 and 143 together with other profit-linked deductions:

• the accounts of the eligible business for the tax year must be audited by an accountant (as defined in section 515(3)(b)) before the specified date in section 63, and the signed audit report must be furnished by that date (rule 66(1));
• the report is in Form No. 32 (rule 66(2));
• each undertaking or enterprise furnishes its own separate report, accompanied by its profit and loss account and balance sheet as if it were a distinct entity (rule 66(3)); and
• the form is accompanied by the documents listed in rule 66(4).

Under section 63(5)(a), the "specified date" is one month before the due date for furnishing the return of income under section 263(1).

Section	Part of Form 32	Documents to attach (rule 66(4))
142 (housing project)	B6	Copy of approval certificate and completion certificate of the housing project
142 (rental housing project)	B6	Copy of the notification issued under section 80-IBA of the 1961 Act, as it existed before repeal
143	B7	Copy of the agreement entered into with the Central Government, State Government or a local authority

Real-life examples

Ravi: tobacco products in Assam

Ravi began a unit in Assam in 2012 making manufactured tobacco products. The location and start date fit section 143(2), but tobacco and manufactured tobacco substitutes are carved out of "eligible article or thing" in section 143(8)(a). He gets no deduction under section 143, however long the unit has run.

Kavita: an old business split into a new company

Kavita's family already ran a hotel in Tripura. In 2013 they moved it into a new entity and called it a new undertaking. Section 143(3)(a) denies the deduction to an undertaking formed by splitting up or reconstructing an existing business. The only exception is revival after the disaster-type damage listed in section 140(4), which does not apply here.

Suresh: a housing developer

Suresh's profits from a housing project that section 80-IBA of the 1961 Act would still have covered form part of his gross total income. Section 142 lets him claim the deduction as that section would have calculated it, and only for the years it would have allowed. He also gets the project's approval and completion certificates, and attaches them to Form 32 (Part B6) with the audit report before the specified date.

Common mistakes

• Treating section 142 as a stand-alone rule. It has no rate or conditions of its own; they live in section 80-IBA of the 1961 Act.
• Assuming any business in the North-East qualifies. Only the manufacturing activity or the eight listed businesses count, and tobacco, pan masala, small plastic bags and refinery products are excluded.
• Claiming other deductions on the same profits. Section 143(5) bars them.
• Forgetting the 80-IB(4) overlap. Section 143(6) caps the combined deduction period at ten tax years.
• Missing Form 32. The audit report must be furnished by the specified date, one for each undertaking, with the documents in rule 66(4).
• Counting the ten years from the wrong year. The clock starts in the initial tax year, when production begins or the substantial expansion is completed.

Quick reference

Point	Section 142	Section 143
Who	Developers of housing and rental housing projects covered by 80-IBA	Undertakings in North-Eastern States started 1 Apr 2007 to 31 Mar 2017
Deduction	As calculated under 80-IBA of the 1961 Act	100% of profits
Period	Only years 80-IBA would have allowed	Ten consecutive tax years from the initial tax year
Other deductions on same profits	Check section 80-IBA	Barred (143(5))
Audit report	Form 32, Part B6	Form 32, Part B7

Where this is in the Act

• Section 142: deduction for profits from housing projects
• Section 143: special provisions for undertakings in North-Eastern States, including 143(1) deduction, 143(2) window, 143(3) and (4) conditions, 143(5) and (6) limits, 143(8) definitions
• Section 140(4) to (7) and (15): referred to by section 143
• Section 63: audit of accounts and "specified date"
• Rule 66 and Form No. 32: audit report for these deductions

For the broader picture of deductions in the new Act, see our overview of deductions from total income. For the audit side, see tax audit: who needs it, limits and due date.

For a CA firm, the practical risk is a client whose Form 32 deadline, which sits one month before the return due date, slips past unnoticed. Finexo's practice management software tracks such deadlines across your client book and reminds you and your clients before they pass. It does not compute deductions or file Form 32 for you.

This article is general information from the Act and Rules, not tax advice. Check the facts of each case with a qualified professional.