Income-tax law / Historical export incentive

Section 10BA of Income Tax Act 1961: Export Deduction for Handmade Wooden Articles

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Section 10BA of the Income-tax Act, 1961 provided a deduction for profits earned by qualifying undertakings exporting specified handmade wooden articles. This was a time-limited benefit: the statute expressly bars deductions for assessment year 2010-11 and subsequent years. The provision is therefore primarily relevant to historical assessments, disputes and interpretation of earlier claims.

Current legal position (October 2026): Section 10BA is not a deduction available for current assessment years. The Income-tax Act, 2025 applies from 1 April 2026, subject to transition and saving provisions for earlier tax years. Do not treat the historical eligibility conditions below as permission to claim a new deduction.

What did Section 10BA provide?

Section 10BA(1) allowed an eligible undertaking to deduct profits and gains derived from exporting qualifying articles or things out of India. A claim under Section 10A or 10B for the same undertaking prevented a Section 10BA deduction. The second proviso to Section 10BA(1) disallowed the deduction for assessment year 2010-11 and every subsequent assessment year.

Eligibility conditions under Section 10BA(2)

Important statutory definitions

Eligible articles or things

The Explanation to Section 10BA defined these as handmade articles or things of artistic value requiring wood as the main raw material. The definition is narrower than handicrafts generally.

Convertible foreign exchange

Foreign exchange treated by the Reserve Bank of India as convertible for the purposes of the Foreign Exchange Management Act, 1999 and applicable rules.

Export turnover

Consideration for eligible exports received in or brought into India in convertible foreign exchange, excluding specified freight, telecommunication and insurance charges attributable to delivery outside India.

Export out of India

The definition excluded a sale in a shop, emporium or other establishment in India that did not involve clearance through a customs station as defined in the Customs Act, 1962.

Receipt of export proceeds: Section 10BA(3)

Export sale proceeds had to be received in or brought into India in convertible foreign exchange within six months after the end of the previous year, or within a longer period permitted by the competent authority. The competent authority was the Reserve Bank of India or another authority legally empowered to regulate foreign-exchange payments.

Deduction calculation: Section 10BA(4)

The statutory formula apportioned business profits to exports:

Eligible export profits = Business profits of undertaking × (Export turnover / Total turnover)

The calculation, documentation and availability of profits remained subject to the applicable law for the historical assessment year.

Audit, double deduction and related provisions

Section 10BA(5): A prescribed accountant's report certifying the deduction was required with the return of income. Section 10BA(6): No other deduction could be allowed in respect of the same export profits where a deduction under this section was allowed. Section 10BA(7): Section 80-IA(8) and 80-IA(10) applied, as far as relevant, to transfers and arrangements affecting eligible profits.

Historical relevance and legislative transition

Section 10BA was inserted by the Taxation Laws (Amendment) Act, 2003, with effect from 1 April 2004. Its express sunset from assessment year 2010-11 means it should not be described as an ongoing export incentive. The Income-tax Act, 2025 came into force on 1 April 2026; historical questions should be evaluated under the law applicable to the relevant assessment year, including saving and transitional provisions.

Official legislation and references

This article is explanatory. For any historical claim or appeal, consult the statutory text and rules as applicable to that assessment year.

Historical Section 10BA text from the original page

The earlier page's substantive statutory extracts and amendment note are preserved below for reference. Numbering and presentation reflect the supplied historical text, not a newly certified consolidated statute.

Read the historical statutory extracts

1(1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export out of India of eligible articles or things, shall be allowed from the total income of the assessee:

Provided that where in computing the total income of the undertaking for any assessment year, deduction under section 10A or section 10B has been claimed, the undertaking shall not be entitled to the deduction under this section: Provided further that no deduction under this section shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2010 and subsequent years.

(2) This section applies to any undertaking which fulfils the following conditions, namely:-

(a) it manufactures or produces the eligible articles or things without the use of imported raw materials;

(b) it is not formed by the splitting up, or the reconstruction, of a business already in existence:

Provided that this condition shall not apply in respect of any 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 33B, in the circumstances and within the period specified in that section;

(c) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose.

Explanation.-The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of this clause as they apply for the purposes of clause (ii) of sub-section (2) of that section;

(d) ninety per cent. or more of its sales during the previous year relevant to the assessment year are by way of exports of the eligible articles or things;

(e) it employs twenty or more workers during the previous year in the process of manufacture or production.

(3) This section applies to the undertaking, if the sale proceeds of the eligible articles or things exported out of India are received in or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.

Explanation.-For the purposes of this sub-section, the expression "competent authority" means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exchange.

(4) For the purposes of sub-section (1), the profits derived from export out of India of the eligible articles or things shall be the amount which bears to the profits of the business of the undertaking, the same proportion as the export turnover in respect of such articles or things bears to the total turnover of the business carried on by the undertaking.

(5) The deduction under sub-section (1) shall not be admissible, unless the assessee furnishes in the prescribed form, along with the return of income, the report of an accountant, as defined in the Explanation below sub-section (2) of section 288, certifying that the deduction has been correctly claimed in accordance with the provisions of this section.

(6) Notwithstanding anything contained in any other provision of this Act, where a deduction is allowed under this section in computing the total income of the assessee, no deduction shall be allowed under any other section in respect of its export profits.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA.

Explanation.-For the purposes of this section,- (a) "convertible foreign exchange" means foreign exchange which is for the time being treated by the Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding law for the time being in force;

(b) "eligible articles or things" means all hand-made articles or things, which are of artistic value and which requires the use of wood as the main raw material;

(c) "export turnover" means the consideration in respect of export by the undertaking of eligible articles or things received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India;

(d) "export out of India" shall not include any transaction by way of sale or otherwise, in a shop, emporium or any other establishment situate in India, not involving clearance of any customs station as defined in the Customs Act, 1962 (52 of 1962).

---------------------- 1. Ins. by Act 54 of 2003, s. 3 (w.e.f. 1-4-2004).

1. Ins. by Act 54 of 2003, s. 3 (w.e.f. 1-4-2004).