This presentation summarizes the incentives available to Hotel Industry under section 35AD of the Indian Income Tax Act, 1961.

1. INCENTIVES AVAILABLE FOR HOTEL
INDUSTRY
Under section 35AD of Income Tax Act, 1961
By : Amit Mundhra FCA
Email : amit.mundhra@gmail.com

2. SECTION 35AD : INVESTMENT LINKED TAX
INCENTIVE
 W.e.f. AY 2010-11, section 35AD has been inserted
to provide investment linked tax incentive to certain
specified business.
 “Building and operating anywhere in India a hotel of
2 star or above category” is included in the list of
specified business.

3. CONDITIONS FOR CLAIMING BENEFIT U/S 35AD
FOR HOTEL INDUSTRY
 2 star category hotel anywhere in India
 Such hotel should be a new unit. It should not be
set up by splitting up or reconstruction of a
business already in existence.
 Purchase of second hand machinery and
equipments is allowed to the extent of 20% of the
total cost of machinery and equipment.
 Books of accounts is required to be audited
irrespective of the turnover limit

4. AMOUNT OF DEDUCTION ALLOWABLE
 100% of the capital expenditure incurred for the
setting up of the hotel with following 2 exceptions
 Cost of land and goodwill acquired will not be included
in the above amount.
 Expenditure prior to commencement of operation shall
be allowed in the year of starting the operation.

5. OTHER IMPORTANT POINTS :-
 If deduction u/s 35AD is allowed, no deduction shall
be allowed under section 80HH to 80RRB or
section 10AA
 No depreciation shall be allowed on the fixed
assets
 The amount of loss computed of hotel shall be set
off only against the profits of said hotel. The amount
of loss unabsorbed shall be carried forward to
unlimited period.
 Such hotel shall continue to be used as hotel for a
period of 8 years from the year of purchase or
construction of hotel. Otherwise deduction will be
withdrawn.