Income tax law | Updated 24 October 2026

Section 35ABA of the Income-tax Act: Deduction for Telecom Spectrum Expenditure

Section 35ABA of the Income-tax Act, 1961 provided an amortised tax deduction for capital expenditure actually paid to acquire the right to use spectrum for telecommunication services. From 1 April 2026, the Income-tax Act, 2025 governs new tax years, with savings for qualifying deductions originating under section 35ABA.

Current-law position: Section 35ABA remains relevant to tax years governed by the 1961 Act and to continuing deductions protected by section 536(2)(s) of the Income-tax Act, 2025. The repeal does not automatically extinguish an eligible unclaimed balance.

What does section 35ABA mean?

Introduced by the Finance Act, 2016 (Act 28 of 2016), effective 1 April 2017, section 35ABA dealt with capital expenditure on the right to use telecommunications spectrum. Rather than deducting the entire qualifying cost immediately, the assessee claimed equal annual portions over the applicable remaining spectrum period.

The provision applies to taxpayers engaged in telecommunication services, subject to actual payment or the prescribed payment mechanism and the other statutory conditions.

How the deduction is calculated

Under the Explanation to section 35ABA, the appropriate fraction is 1 divided by the number of relevant previous years. The annual deduction is the eligible spectrum expenditure multiplied by that fraction.

Situation	Relevant years begin
Spectrum fee paid before the telecom business starts	Previous year in which the business commences
Spectrum fee paid after commencement	Previous year in which the spectrum fee is actually paid

The period continues through the previous years in which the spectrum right remains in force, subject to the statutory rules.

Section 35ABA: subsections and definitions

Subsection (1): qualifying capital expenditure

Allows the prescribed fraction of capital expenditure incurred to acquire the right to use spectrum, whether before commencement of the telecom business or later, where the applicable payment requirement is satisfied.

Subsection (2): application of section 35ABB

Applies subsections (2) to (8) of section 35ABB to spectrum rights, reading references to a licence as references to spectrum. These linked provisions address matters including transfers, amalgamation or demerger, and restrictions against overlapping deductions or depreciation, as applicable.

Subsection (3): failure to comply

If a deduction was granted and the taxpayer subsequently fails to comply with the provision, the deduction may be treated as wrongly allowed. The Assessing Officer may recompute income and rectify the assessment under the mechanism of section 154. The specified four-year period is measured from the end of the previous year in which non-compliance occurs.

Explanation: statutory terms

Relevant previous years: the years beginning with business commencement when payment preceded commencement, or otherwise beginning with the year of actual payment, continuing for the relevant spectrum term.

Appropriate fraction: one divided by the total number of relevant previous years.

Payment has actually been made: actual payment regardless of when the liability accrued under the taxpayer's accounting method, or payment in the prescribed manner. Deferred payment arrangements require examination of the applicable rules and conditions.

Income-tax Act, 2025: treatment from 1 April 2026

The Income-tax Act, 2025 took effect on 1 April 2026 for tax years beginning on or after that date. Earlier tax years continue to be governed by the 1961 Act under the transition provisions. In particular, section 536(2)(s) preserves qualifying remaining deductions under old section 35ABA, subject to fulfilment of the original conditions, and treats them as part of the deferred revenue expenditure allowance under the new framework.

Accordingly, businesses with an existing spectrum deduction schedule should maintain supporting records of spectrum allotment, payment terms, actual payments, deduction already claimed, and the remaining spectrum period. For fresh expenditure from tax year 2026-27, consult the operative provisions of the 2025 Act and applicable rules rather than treating repealed section 35ABA as a new standalone deduction.

Illustrative deduction

Assume a telecom operator paid Rs. 100 crore for an eligible spectrum right and has 10 relevant previous years under the statutory definition. The simplified annual deduction under section 35ABA would be Rs. 10 crore (Rs. 100 crore divided by 10), subject to transfer, payment, compliance and other applicable provisions. This is an illustration, not a determination of any particular spectrum auction's tax treatment.

Official legislation and guidance

This article provides general information. Specific tax treatment depends on the governing tax year, spectrum agreement, payment structure and applicable law.