Section 138 - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc
This transitional provision carries forward eligibility under old section 80-IA for qualifying infrastructure and related undertakings. The amount and remaining tax years continue to be determined under the repealed 1961 Act as preserved by the 2025 Act.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current-law control
This page uses the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026. Earlier years and saved proceedings remain subject to the repeal-and-savings framework.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
This transitional provision carries forward eligibility under old section 80-IA for qualifying infrastructure and related undertakings. The amount and remaining tax years continue to be determined under the repealed 1961 Act as preserved by the 2025 Act.
Who should use this section
Eligible undertakings, enterprises or units claiming a profit-linked or transition deduction, generally subject to historical eligibility and audit conditions This applicability note is specific to section 138.
Old-law bridge
1961 Act section 80-IA
The bridge is navigational only. A 1961 Act case or rule is carried forward only after checking wording, transition provisions and the current 2025 Act text.
Professional alert
Exception / professional alert This is not a new entry route. Rule 66 requires audited Form 32 and the old eligibility file must be preserved.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| Rule 66 | Audit report for profit-linked deductions | Form 32 |
Worked application
A qualifying infrastructure undertaking had three years left in its old section 80-IA holiday on 1 April 2026. Section 138 preserves only the remaining eligible period and old-law computation, not a fresh holiday.
Evidence / compliance checklist
- Maintain the original eligibility file for section 138, including commencement/approval history and the remaining deduction period.
- Keep unit-wise books and a computation linking eligible profits to the qualifying undertaking or activity (section 138: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.).
- Where Rule 66 applies, obtain Form 32 and reconcile the accountant-certified figures to the return before the due date (section 138: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.).
- Preserve evidence that reconstruction, transfer, location, approval and other formation conditions continue to be satisfied (section 138: Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.).
Common mistake
Treating section 138 as a fresh 2026 tax holiday. For section 138, the preserved or transitional old-law eligibility must be checked specifically; the deduction clock does not restart merely because the 2025 Act is now in force.
Recommended approach
For section 138, fix the governing tax year, identify the operative sub-section for “Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.”, trace every amount to evidence, apply only verified Rule/Form links, and retain a computation that another reviewer can reproduce from the primary source.
Thresholds, periods and timing checkpoints
- 138. In respect of any tax year, where—
- derived from such business for such tax year under the provisions of the
- (ii) the deduction under this Act shall be allowed only for such tax years,
Judicial / interpretive bridge
- Liberty India v. Commissioner of Income Tax (Supreme Court; (2009) 317 ITR 218): The “derived from” nexus analysis remains a relevant interpretive bridge for profit-linked deductions where current wording preserves old section 80-IA mechanics; always re-test against the current section and saved old-law conditions. Official Supreme Court source
Related provisions
Current statutory text
Primary-source trail
FAQs
What does section 138 of the Income-tax Act, 2025 cover?
Section 138 covers deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc.. The operative result depends on the exact statutory conditions shown on this page and applies from 1 April 2026, subject to transition/savings provisions.
Who should check section 138?
Eligible undertakings, enterprises or units claiming a profit-linked or transition deduction, generally subject to historical eligibility and audit conditions This applicability note is specific to section 138.
Are there specific Rules or Forms for section 138?
Rule 66 - Audit report for profit-linked deductions / Form 32