Section 33 of ITA, 1961 : Section 33: Development Rebate

Explanation using Example

Imagine a manufacturing company 'X' that decides to expand its production capacity in the financial year 2022-23. To do this, 'X' purchases new machinery for manufacturing widgets, which is an article specified in the Fifth Schedule of the Income-tax Act. The cost of this new machinery is INR 10 million.

Under Section 33 of the Income-tax Act, 1961, 'X' can claim a development rebate. Assuming the machinery was installed after March 31, 1970, the rebate would be 25% of the actual cost. Therefore, 'X' would be able to claim INR 2.5 million (25% of INR 10 million) as a development rebate for the financial year 2022-23, provided the machinery is used wholly for the business purposes and other conditions of Section 34 are met.

This rebate would reduce the taxable income of 'X', thereby lowering the tax liability for that financial year. It is important to note that the actual percentages and conditions for claiming the development rebate might have been updated since the law quoted, and the company must adhere to the current provisions at the time of claiming the rebate.