Chapter VIII - Deductions to be Made in Computing Total Income
Section 143
Section 143: deduction for undertakings in the North-Eastern States
Section 143 gives a 100% profit deduction, for ten consecutive tax years, to undertakings that began (or begin) manufacturing, undertook substantial expansion, or carried on certain listed eligible businesses in one of the North-Eastern States during a defined window - 1 April 2007 to before 1 April 2017. It carries several conditions and exclusions similar in structure to Section 140's start-up conditions.
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Need advice on Section 143?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking, to which this section applies, from any business referred to in sub-section (2), there shall be allowed, in computing the total income of the assessee, a deduction of an amount equal to 100% of the profits and gains derived from such business for ten consecutive tax years commencing with the initial tax year.
(2) This section applies to any undertaking which during the period beginning on the 1st April, 2007 and ending before the 1st April, 2017, has begun or begins, in any of the North-Eastern States,— (a) to manufacture or produce any eligible article or thing; or (b) to undertake substantial expansion to manufacture or produce any eligible article or thing; or (c) to carry on any eligible business.
(3) This section applies to any undertaking which fulfils all the following conditions:— (a) it is not formed by splitting up, or the reconstruction, of a business already in existence (other than an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 140(4), in the circumstances and within the period specified therein); (b) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.
(4) For the purposes of sub-section (3)(b), the provisions of section 140(5) and (6) shall apply.
(5) Irrespective of anything contained in any other provision of this Act, in computing the total income of the assessee, no deduction shall be allowed under any other section contained in this Chapter in relation to the profits and gains of the undertaking.
(6) Irrespective of anything contained in this Act, no deduction shall be allowed to any undertaking under this section, where the total period of deduction inclusive of the period of deduction under this section or under second proviso to section 80-IB(4) of the Income-tax Act, 1961 exceeds ten tax years.
(7) The provisions contained in section 140(7) to (15) shall, so far as may be, apply to the eligible undertaking under this section.
(8) For the purposes of this section,— (a) “eligible article or thing” means the article or thing other than the following:— (i) goods falling under Chapter 24 of the First Schedule to the Central Excise Tariff Act, 1985, which pertains to tobacco and manufactured tobacco substitutes; (ii) pan masala as covered under Chapter 21 of the First Schedule to the Central Excise Tariff Act, 1985; (iii) plastic carry bags of less than twenty microns as specified by the Ministry of Environment and Forests vide notification numbers S.O. 705(E), dated the 2nd September, 1999 and S.O. 698(E), dated the 17th June, 2003; and (iv) goods falling under Chapter 27 of the First Schedule to the Central Excise Tariff Act, 1985, produced by petroleum oil or gas refineries; (b) “eligible business” means the business of— (i) hotel (not below two star category); (ii) adventure and leisure sports including ropeways; (iii) providing medical and health services in the nature of nursing home with a minimum capacity of twenty-five beds; (iv) running an old-age home; (v) operating 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; (vi) running information technology related training centre; (vii) manufacturing of information technology hardware; and (viii) bio-technology; (c) “initial tax year” means the tax year in which the undertaking begins to manufacture or produce articles or things, or completes substantial expansion; (d) “North-Eastern States” means the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura; (e) “substantial expansion” means increase in the investment in the plant and machinery by at least 25% of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the tax year in which the substantial expansion is undertaken.
Introduction
Section 143 gives an eligible North-Eastern undertaking a profit deduction for up to ten consecutive tax years, but its commencement or expansion must fall in the historic 2007–2017 window. Activity, State, new-undertaking and anti-duplication tests also apply.
Key takeaways
Legacy North-East relief
A qualifying North-Eastern undertaking can deduct 100% of eligible business profits for ten consecutive tax years beginning with its initial tax year.
Historical entry window
The undertaking must have commenced the specified manufacture, substantial expansion or eligible business from 1 April 2007 to before 1 April 2017; this is not a fresh open-ended incentive.
The deduction
Where the gross total income of an assessee includes profits and gains derived by a qualifying undertaking from a business described below, a deduction equal to 100% of the profits and gains derived from that business is allowed for ten consecutive tax years, commencing with the initial tax year.
Who qualifies - the time window and activities
The section applies to any undertaking that, during the period beginning on 1 April 2007 and ending before 1 April 2017, in any of the North-Eastern States:
- begins to manufacture or produce any eligible article or thing; or
- undertakes substantial expansion to manufacture or produce any eligible article or thing; or
- carries on any eligible business.
Conditions the undertaking must meet
An undertaking must also satisfy both of these conditions:
- It is not formed by splitting up, or the reconstruction, of a business already in existence (other than an undertaking re-established, reconstructed or revived in the circumstances and within the period specified for the Section 140(4) exception).
- It is not formed by transferring to a new business machinery or plant previously used for any other purpose - the same rules applied for this purpose under Section 140(5) and (6).
"Eligible article or thing" and "eligible business"
"Eligible article or thing" excludes: goods falling under Chapter 24 of the Central Excise Tariff (tobacco and manufactured tobacco substitutes); pan masala under Chapter 21; plastic carry bags of less than twenty microns as specified by the Ministry of Environment and Forests notifications referred to in the section; and goods falling under Chapter 27 (produced by petroleum oil or gas refineries).
"Eligible business" is defined to mean the business of:
- Hotel (not below two-star category)
- Adventure and leisure sports including ropeways
- Providing medical and health services in the nature of a nursing home with a minimum capacity of 25 beds
- Running an old-age home
- Operating 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
- Running an information technology-related training centre
- Manufacturing of information technology hardware
- Bio-technology
Other rules
No deduction is allowed under any other section of this Chapter in relation to the profits and gains of the same undertaking - the Section 143 deduction cannot be stacked with another Chapter VIII deduction on the same profits.
No deduction is allowed under Section 143 where the total period of deduction (inclusive of the period claimed under this section or under the second proviso to section 80-IB(4) of the Income-tax Act, 1961) exceeds ten tax years.
The rules in Section 140(7) to (6) [as continued from the corresponding sub-sections of Section 140] apply, so far as may be, to an eligible undertaking under Section 143.
Key definitions
| Term | Meaning |
|---|---|
| Initial tax year | The tax year in which the undertaking begins to manufacture or produce articles or things, or completes substantial expansion |
| North-Eastern States | Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura |
| Substantial expansion | An increase in the investment in plant and machinery by at least 25% of the book value of plant and machinery (before taking depreciation in any year), as on the first day of the tax year in which the substantial expansion is undertaken |
Step-by-step flow for applying Section 143
- 1
Did the undertaking begin the specified activity in a North-Eastern State between 1 April 2007 and before 1 April 2017?
Section 143(2): began manufacturing or producing an eligible article or thing, undertook substantial expansion, or began carrying on an eligible business, in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim or Tripura.
- No: Section 143 does not apply.
- Yes: Go to the next step.
- 2
Is the output an eligible article or thing, or the activity an eligible business?
Section 143(8)(a) excludes tobacco goods (Chapter 24), pan masala (Chapter 21), specified plastic carry bags below twenty microns and refinery goods under Chapter 27. Section 143(8)(b) lists the eligible businesses.
- No: No deduction under Section 143.
- Yes: Go to the next step.
- 3
Are the formation conditions in Section 143(3) met?
Not formed by splitting up or reconstruction of an existing business (subject to the Section 140(4) revival exception), and not formed by transfer of previously used machinery or plant (Section 140(5) and (6) apply).
- No: No deduction under Section 143.
- Yes: Go to the next step.
- 4
Is the tax year within the ten consecutive years from the initial tax year, and within the combined ten-year cap?
Section 143(1) gives ten consecutive tax years from the initial tax year; Section 143(6) bars the deduction where the total period, including any period under the second proviso to section 80-IB(4) of the 1961 Act, exceeds ten tax years.
- No: No deduction for this tax year.
- Yes: Go to the next step.
- 5
Deduct 100% of the eligible profits
Compute profits applying Section 140(7) to (15) so far as may be (Section 143(7)), and claim no other Chapter VIII deduction on the same undertaking's profits (Section 143(5)).
Practical checklist
Do
- Confirm the exact North-Eastern State, eligible output or business and commencement or substantial-expansion date.
- Trace prior deduction years under this section and old Section 80-IB to enforce the combined ten-year limit.
Avoid
- Do not assume a new undertaking formed after the statutory window qualifies.
- Do not deduct the same undertaking profit under another deduction in this Chapter.
Illustrative example
Worked example: testing substantial expansion
Hypothetical facts (illustration only, not a real taxpayer): A food-processing undertaking in Assam undertook an expansion during the 2007-2017 window. On the first day of the tax year in which the expansion was undertaken, the book value of its plant and machinery, before taking depreciation in any year, was ₹8 crore. During the expansion it invested a further ₹2.4 crore in plant and machinery. Its products are not in any excluded category.
25% benchmark
25% of ₹8 crore = ₹2 crore.
Compare the investment
₹2.4 crore is 30% of ₹8 crore, which is at least 25%, so it is a "substantial expansion" under Section 143(8)(e).
Initial tax year
The initial tax year is the year in which the substantial expansion is completed (Section 143(8)(c)); the ten consecutive years count from that year.
Overlap check
Any years claimed under the second proviso to section 80-IB(4) of the 1961 Act count towards the combined ten-year cap in Section 143(6).
Outcome
- The undertaking qualifies on the expansion test; 100% of its eligible profits is deductible only for those years of the ten-year run that are still available.
- Had the new investment been ₹1.6 crore (20%), it would not be a substantial expansion and Section 143 would not apply on that basis.
Glossary
- Substantial expansion
- The increase in plant-and-machinery investment defined in subsection (8)(e).
- Initial tax year
- The year manufacturing or production begins, or substantial expansion is completed, as defined here.
Frequently asked questions
Can a new North-Eastern-State undertaking claim Section 143 today?
The section only covers undertakings that began manufacturing, undertook substantial expansion, or started an eligible business during the window from 1 April 2007 to before 1 April 2017, so it applies to undertakings set up within that specific period.
How long can the deduction be claimed?
100% of profits and gains from the eligible business for ten consecutive tax years, commencing with the initial tax year, subject to the ten-year overall cap when combined with certain deductions under the 1961 Act.
Can the undertaking also claim another Chapter VIII deduction on the same profits?
No - Section 143(5) expressly bars claiming a deduction under any other section of Chapter VIII in relation to the profits and gains of the same undertaking.
Need help applying this provision to your situation?
Talk to our tax team about North-Eastern States tax benefitsLast updated 10 October 2026