Income Tax Act, 2025
Section 4: Ins. by Act 14 of 1982, s. 18 (w.e.f. 11983).
4. Ins. by Act 14 of 1982, s. 18 (w.e.f. 11983).
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(b) the execution of any work undertaken by him and forming part of a foreign project
undertaken by any other person in pursuance of a contract entered into by such other person,
with the Government of a foreign State or any statutory or other public authority or agency in a foreign
State, or a foreign enterprise, there shall, in accordance with and subject to the provisions of this section,
be allowed, in computing the total income of the assessee, 1[a deduction from such profits and gains of an
amount equal to—
(i) forty per cent. thereof for an assessment year beginning on the 1st day of April, 2001;
(ii) thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2002;
(iii) twenty per cent. thereof for an assessment year beginning on the 1st day of April, 2003;
(iv) ten per cent. thereof for an assessment year beginning on the 1st day of April, 2004,
and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April,
2005 and any subsequent assessment year:]
Provided that the consideration for the execution of such project or, as the case may be, of such work
is payable in convertible foreign exchange.
(2) 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 2[the Foreign
Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;
(b) “foreign project” means a project for—
(i) the construction of any building, road, dam, bridge or other structure outside India ;
(ii) the assembly or installation of any machinery or plant outside India ;
(iii) the execution of such other work (of whatever nature) as may be prescribed.
(3) The deduction under this section shall be allowed only if the following conditions are fulfilled,
namely:—
(i) the assessee maintains separate accounts in respect of the profits and gains derived from the
business of the execution of the foreign project, or, as the case may be, of the work forming part of
the foreign project undertaken by him and, where the assessee is a person other than an Indian
company or a co-operative society, such accounts have been audited by an accountant as defined in
the Explanation below sub-section (2) of section 288 and the assessee furnishes, along with his return
of income, the report of such audit in the prescribed form duly signed and verified by such
accountant;
1. Subs. by Act 10 of 2000, s. 32, for “a deduction from such profits and gains of an amount equal to fifty per cent. thereof”
(w.e.f. 12001).
2. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 12013).
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1[(ia) the assessee furnishes, along with his return of income, a certificate in the prescribed
form from an accountant as defined in the Explanation below sub-section (2) of section 288, duly
signed and verified by such accountant, certifying that the deduction has been correctly claimed in
accordance with the provisions of this section;]
(ii) an amount equal to 2[such percentage of the profits and gains as is referred to in
sub-section (1) in relation to the relevant assessment year] is debited to the profit and loss account of
the previous year in respect of which the deduction under this section is to be allowed and credited to
a reserve account (to be called the “Foreign Projects Reserve Account”) to be utilised by the assessee
during a period of five years next following for the purposes of his business other than for distribution
by way of dividends or profits;
(iii) an amount equal to 2[such percentage of the profits and gains as is referred to in
sub-section (1) in relation to the relevant assessment year] is brought by the assessee in convertible
foreign exchange into India, in accordance with the provisions of the Foreign Exchange Management
Act, 1999 (42 of 1999), and any rules made thereunder, within a period of six months from the end of
the previous year referred to in clause (ii) or, 3[within such further period as the competent authority
may allow in this behalf:]
Provided that where the amount credited by the assessee to the Foreign Projects Reserve Account
in pursuance of clause (ii) or the amount brought into India by the assessee in pursuance of clause (iii)
or each of the said amounts is less than 2[such percentage of the profits and gains as is referred to in
sub-section (1) in relation to the relevant assessment year], the deduction under that sub-section shall
be limited to the amount so credited in pursuance of clause (ii) or the amount so brought into India in
pursuance of clause (iii), whichever is less.
1[Explanation.—For the purposes of clause (iii), 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) If at any time before the expiry of five years from the end of the previous year in which the
deduction under sub-section (1) is allowed, the assesseeutilises the amount credited to the Foreign
Projects Reserve Account for distribution by way of dividends or profits or for any other purpose which is
not a purpose of the business of the assessee, the deduction originally allowed under sub-section (1) shall
be deemed to have been wrongly allowed, and the 4[Assessing Officer] may, notwithstanding anything
contained in this Act, recompute the total income of the assessee for the relevant previous year and make
the necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the
period of four years specified in sub-section (7) of that section being reckoned from the end of the
previous year in which the money was so utilised.
(5) Notwithstanding anything contained in any other provision of this Chapter under the heading”
C.—Deductions in respect of certain incomes”, no part of the consideration or of the income comprised in
the consideration payable to the assessee for the execution of a foreign project referred to in clause (a) of
sub-section (1) or of any work referred to in clause (b) of that sub-section shall qualify for deduction for
any assessment year under any such other provision.]
the execution of any work undertaken by him and forming part of a foreign project
undertaken by any other person in pursuance of a contract entered into by such other person,
with the Government of a foreign State or any statutory or other public authority or agency in a foreign
State, or a foreign enterprise, there shall, in accordance with and subject to the provisions of this section,
be allowed, in computing the total income of the assessee, 1[a deduction from such profits and gains of an
amount equal to—
forty per cent. thereof for an assessment year beginning on the 1st day of April, 2001;
thirty per cent. thereof for an assessment year beginning on the 1st day of April, 2002;
twenty per cent. thereof for an assessment year beginning on the 1st day of April, 2003;
ten per cent. thereof for an assessment year beginning on the 1st day of April, 2004,
and no deduction shall be allowed in respect of the assessment year beginning on the 1st day of April,
2005 and any subsequent assessment year:]
Provided that the consideration for the execution of such project or, as the case may be, of such work
is payable in convertible foreign exchange.
For the purposes of this section,—
“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 2[the Foreign
Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder;
“foreign project” means a project for—
the construction of any building, road, dam, bridge or other structure outside India ;
the assembly or installation of any machinery or plant outside India ;
the execution of such other work (of whatever nature) as may be prescribed.
The deduction under this section shall be allowed only if the following conditions are fulfilled,
namely:—
the assessee maintains separate accounts in respect of the profits and gains derived from the
business of the execution of the foreign project, or, as the case may be, of the work forming part of
the foreign project undertaken by him and, where the assessee is a person other than an Indian
company or a co-operative society, such accounts have been audited by an accountant as defined in
the Explanation below sub-section
of section 288 and the assessee furnishes, along with his return
of income, the report of such audit in the prescribed form duly signed and verified by such
accountant;
1. Subs. by Act 10 of 2000, s. 32, for “a deduction from such profits and gains of an amount equal to fifty per cent. thereof”
(w.e.f. 12001).
2. Subs. by Act 17 of 2013, s. 4, for “the Foreign Exchange Regulation Act, 1973 (46 of 1973)” (w.e.f. 12013).
362
1[
the assessee furnishes, along with his return of income, a certificate in the prescribed
form from an accountant as defined in the Explanation below sub-section
of section 288, duly
signed and verified by such accountant, certifying that the deduction has been correctly claimed in
accordance with the provisions of this section;]
an amount equal to 2[such percentage of the profits and gains as is referred to in
sub-section
in relation to the relevant assessment year] is debited to the profit and loss account of
the previous year in respect of which the deduction under this section is to be allowed and credited to
a reserve account (to be called the “Foreign Projects Reserve Account”) to be utilised by the assessee
during a period of five years next following for the purposes of his business other than for distribution
by way of dividends or profits;
an amount equal to 2[such percentage of the profits and gains as is referred to in
sub-section
in relation to the relevant assessment year] is brought by the assessee in convertible
foreign exchange into India, in accordance with the provisions of the Foreign Exchange Management
Act, 1999 (42 of 1999), and any rules made thereunder, within a period of six months from the end of
the previous year referred to in clause
or, 3[within such further period as the competent authority
may allow in this behalf:]
Provided that where the amount credited by the assessee to the Foreign Projects Reserve Account
in pursuance of clause
or the amount brought into India by the assessee in pursuance of clause
or each of the said amounts is less than 2[such percentage of the profits and gains as is referred to in
sub-section
in relation to the relevant assessment year], the deduction under that sub-section shall
be limited to the amount so credited in pursuance of clause
or the amount so brought into India in
pursuance of clause
If at any time before the expiry of five years from the end of the previous year in which the
deduction under sub-section
is allowed, the assesseeutilises the amount credited to the Foreign
Projects Reserve Account for distribution by way of dividends or profits or for any other purpose which is
not a purpose of the business of the assessee, the deduction originally allowed under sub-section
shall
be deemed to have been wrongly allowed, and the 4[Assessing Officer] may, notwithstanding anything
contained in this Act, recompute the total income of the assessee for the relevant previous year and make
the necessary amendment; and the provisions of section 154 shall, so far as may be, apply thereto, the
period of four years specified in sub-section
of that section being reckoned from the end of the
previous year in which the money was so utilised.
Notwithstanding anything contained in any other provision of this Chapter under the heading”
C.—Deductions in respect of certain incomes”, no part of the consideration or of the income comprised in
the consideration payable to the assessee for the execution of a foreign project referred to in clause
of
sub-section
or of any work referred to in clause
of that sub-section shall qualify for deduction for
any assessment year under any such other provision.]