Income Tax Law | Mineral Oil Exploration
Section 293A of the Income-tax Act, 1961: Tax Exemptions for Mineral Oil Operations
Section 293A authorised the Central Government to grant specified income-tax exemptions, rate reductions and other modifications for certain participants in petroleum and natural gas exploration and production. From 1 April 2026, the corresponding provision is Section 527 of the Income-tax Act, 2025.
Purpose and scope of Section 293A
Introduced by the Finance Act, 1981 with effect from 1 April 1981, Section 293A of Chapter XXIII (Miscellaneous) empowered the Central Government, when satisfied that it was necessary or expedient in the public interest, to issue a notification in the Official Gazette granting tax relief to eligible persons involved in the prospecting, extraction or production of mineral oils.
This is an enabling power, not an automatic tax holiday. The precise relief, eligible class and conditions depend on the applicable Gazette notification.
Section 293A: Subsection-by-subsection explanation
Subsection (1): Power to grant relief
The Central Government could notify an exemption, a reduction in the income-tax rate or another modification concerning the whole or part of the income of the classes specified in subsection (2). It could also modify the status in which qualifying persons or their members were assessed on income from the business described in subsection (2)(a).
The proviso permitted a notification modifying assessment status to operate from an assessment year beginning on or after 1 April 1993, subject to its terms.
Subsection (2): Persons who may be covered
Clause (a): Persons who entered into agreements with the Central Government for participation by the Government or its authorised person in a business of prospecting for, extracting or producing mineral oils.
Clause (b): Persons providing related services or facilities, or supplying ships, aircraft, machinery or plant by sale or hire, in connection with qualifying mineral-oil operations carried on by the Government or a person specified by Gazette notification.
Clause (c): Employees of persons described in clauses (a) and (b).
Subsection (3): Parliamentary oversight
Every notification issued under Section 293A was required to be laid before each House of Parliament.
Statutory definitions
Mineral oil: The Explanation expressly includes petroleum and natural gas.
Status: The category in which a taxpayer is assessed, such as an individual or a Hindu undivided family. The provision addressed assessment status as well as possible tax relief.
Section 527 of the Income-tax Act, 2025
The official section-mapping document identifies Section 527 of the Income-tax Act, 2025 as the successor to Section 293A. The new Act took effect on 1 April 2026, and the Income-tax Act, 1961 was repealed subject to savings and transition rules in Section 536 of the new Act.
Consequently, earlier-year assessments, appeals and other proceedings may continue under the 1961 Act as provided by the savings clause. For a current-year transaction, examine Section 527, the applicable notification and the terms of the relevant petroleum contract rather than relying on the old section number alone.
Practical considerations for oil and gas businesses
Before claiming any exemption or modified rate, verify that the relevant agreement, services, supplies or employment falls within the notified class; confirm the notification's operative period and conditions; and retain the contract, approval and supporting records.
For earlier years, Section 44BB of the 1961 Act provided a separate presumptive computation rule for certain non-resident oilfield service providers. It expressly excluded cases in which Section 293A applied for the relevant computation. These provisions should not be treated as interchangeable or as providing an automatic combined benefit.
Tax treatment may also depend on residence, permanent establishment, treaty provisions, withholding obligations and the facts of the particular contract.
Legislative history
Section 293A was inserted by the Finance Act, 1981 with effect from 1 April 1981. The Finance Act, 1995 amended the provision concerning assessment status and substituted its Explanation with retrospective effect from 1 April 1993.
Official legislation and guidance
Income Tax Department: Section 293A, Income-tax Act, 1961
Income Tax Department: Official section mapping (293A to 527)
Income Tax Department: Transition to the Income-tax Act, 2025
Income Tax Department: Section 44BB of the 1961 Act
Information updated 28 October 2026. This article is a general explanation; applicable Gazette notifications and statutory text govern individual cases.