ENTREPRENEURIAL DEVELOPMENT

2. Tax Benefits for Small-Scale Industries in India
Under section 80J of the Income Tax Act 1961, new
industrial companies, like
small-scale businesses, are excluded from paying
income tax on their earnings up
to a limit of 6 % of their assets employing per year.
Such tax exemption is allowed
from the outset of output for a term of five years.

3. The Following two conditions available for this tax exemption facility:
1. The unit should not formed by the splitting or reconstruction for an
existing unit.
2. The unit should be 10 or more workers in a manufacturing process with
the power or at least 20 workers without power.
Devaluation
Under Section 32 of the Income Tax Act, 1961, a small-scale
industry is entitled to a deduction at the prescribed rate on
the depreciation account on the block of assets. Small
businesses are allowed to deduct a maximum of Rs. 20 lakh
on the diminishing balance method for depreciation on the
plant and machinery. The depreciation is calculated on its
written down value in the case of an asset acquired before
the accounting period.
An additional allowance called ‘ Extra Shift Allowance ‘ is also
available for plant and machinery used in double or triple

4. Following conditions before it becomes eligible for Deduction in
Devaluation :
1. An assessee is any individual who is liable to pay taxes to the
government against any kind of income earned or any losses
incurred by him for a particular assessment year.
2. In addition, the property must be used for the company or
occupation of the assesses.
3. Depreciation payment or depreciation is only allowed for fixed
assets, i.e. equipment, plant, and furniture production.
4. In the case of a company, depreciation from the assessment year
1991-92 will be limited to Rs. 7,590/- of the amount calculated at
the specified percentage on the written down value block of assets.

5. Small-scale businesses were allowed to obtain a rehabilitation
benefit under Section 33-B of the Income Tax Act, 1961, for the
following reasons:
1. Floods, typhoons, floods, cyclones, wildfires, earthquakes, etc.
2. civil disturbance
3.Accidental or explosive fire
4.Action taken in combating an enemy.
The rehabilitation allowance should be used for business purposes
within three years of restoration, reconstruction or rehabilitation of
the unit. The rehabilitation allowance is permitted to the unit
equivalent to 60% of the unit’s allowable deduction amount.
Investment Allowance:
Starting in 1976, the investment allowance was introduced to replace
the initial provision for depreciation. section 31 A of the Income Tax
Act, 1961, the investment allowance is allowed at a rate of 25% of the
cost of acquiring new installed plant or machinery.

6. Although the investment allowance has been made
available for the articles or items except for certain items
of low priority, a special dispensation has been provided
for the plant and machinery installed in small-scale
industries in accordance with the Eleventh Schedule to
the Income Tax Act 1961.
Small-scale industries have an advantage in claiming a
deduction of investment allowance compared to other
industries. Investment allowance may be used by a small-
scale enterprise such that it has used machinery or plant
whether in the year of operation or in the immediately
following year if the profit is not forfeited.

7. Under Section 35 of the Income Tax Act, 1961, the following
deductions in respect of expenditure on scientific research are
allowed:
Any revenue expenditure incurred in the previous year in connection
with the assessee’s business in scientific research.
Any amount paid to a scientific research association or to a university,
college, institution or public company having its object, an
undertaking of scientific research.
Any capital expenditure on scientific research related to the assessee’s
business subject to Section 35(2) of the Income Tax Act, 1961.
In the case of any unabsorbed capital expenditure incurred in the
process of scientific research, the clause of the Income Tax Act
requires it to be carried forward for an indefinite period of time in
addition to the profits earned by the company in the following years.