490 IT Act 2025 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
What is Section 486-490 SEZ Under the Income Tax Act, 2025?
Section 486-490 SEZ under Section 486-490 of the Income Tax Act, 2025 is the consolidated incentive provisions — (a) SEZ: profit-linked deduction — 100% for 5 years, 50% for 5 years (for units commencing before applicable cutoff). (b) IFSC (GIFT City): 10-year tax holiday, 0% LTCG for non-residents, reduced tax on banking and insurance operations, no commodity transaction tax. (c) Eligible Startup (80-IAC equivalent): 100% profit deduction for 3 out of 10 years, DPIIT recognition required.
IFSC (GIFT City Gujarat) is positioned as India's global financial hub — competing with Singapore, Dubai, and Hong Kong. Incentives include: complete tax holiday for 10 years (any 10 out of 15 years from permission), exemption from dividend distribution tax, securities transaction tax, commodity transaction tax, and stamp duty on securities transactions. Over 400+ entities are operational in GIFT IFSC as of 2026.
This comprehensive guide covers Section 486-490 SEZ — legal provisions, computation methodology, practical examples with calculations, applicable forms and filing deadlines, penalties for non-compliance, judicial interpretations, and a compliance checklist. Updated with CBDT notifications and circulars up to March 2026.
Chapter: Ch 21 — Miscellaneous
Section(s): Section 486-490
Rules: Income Tax Rules, 2026
Effective: April 1, 2026
Filing Portal: incometax.gov.in
Who Does Section 486-490 Apply To?
| Taxpayer Category | Applicable? | Key Conditions |
|---|---|---|
| Individual (Resident) | Yes | Global income taxable. Old/New regime choice available |
| Individual (Non-Resident) | Yes, limited | Only Indian-sourced income. DTAA benefits available |
| HUF | Yes | Same slab rates as individual. Partition provisions apply |
| Partnership Firm / LLP | Yes | Flat 30% tax rate. No slab benefit. Partner remuneration deductible |
| Domestic Company | Yes | 22% (115BAA) or 25%/30% normal rate. MAT 15% applies |
| Foreign Company | Yes, limited | 40% on Indian income. DTAA benefits. PE concept applies |
| AOP / BOI / Trust | Yes | MMR or slab rates depending on structure and income |
Section 486-490 SEZ — Detailed Analysis
Section 486-490 — Core Provisions
What it provides: Section 486-490 establishes the legal framework for Section 486-490 SEZ — covering the charging provision (what is taxable), computation methodology (how to calculate), applicable rates, exemptions/deductions available, and compliance requirements. It must be read with the applicable Income Tax Rules, 2026 and CBDT circulars for complete understanding.
Key aspects: (a) Scope — who is covered and what income is included, (b) Computation — step-by-step calculation methodology with specific inclusions and exclusions, (c) Rates — applicable tax rates including surcharge and cess, (d) Exemptions — conditions for claiming any available exemptions, (e) Filing — return forms, due dates, and documentation requirements.
Individual taxpayers: Must choose between old regime (with deductions) and new regime (lower rates, fewer deductions). New regime is default from AY 2024-25 under the 1961 Act. The 2025 Act continues this default position.
Business taxpayers: Must maintain books of account (Section 44AA/corresponding new section), get tax audit if turnover exceeds threshold (Section 44AB equivalent), file return by October 31, and pay advance tax in quarterly installments.
Compliance Framework
Return filing: ITR in prescribed form by due date (July 31 for individuals without audit, October 31 for audit cases, November 30 for transfer pricing). Belated return till December 31 with Rs. 5,000 penalty. Updated return (ITR-U) within 24 months with 25%/50% additional tax.
Advance tax: If tax liability exceeds Rs. 10,000 — pay in 4 installments: 15% by June 15, 45% by September 15, 75% by December 15, 100% by March 15. Interest under 234B (short payment) and 234C (deferment) at 1% per month.
TDS/TCS: Deductors must deduct at prescribed rates, deposit by 7th of next month (March: April 30), file quarterly returns (24Q/26Q/27Q/27EQ), and issue certificates (Form 16/16A). Late deposit: interest 1.5% per month from deduction to deposit date.
Practical Examples — Section 486-490 SEZ
Example 1 — Salaried Individual
Scenario: Rajesh, salaried employee in Delhi, gross salary Rs. 12 lakh, HRA received Rs. 2.4 lakh, rent paid Rs. 3 lakh, 80C investments Rs. 1.5 lakh, 80D medical insurance Rs. 25,000.
Under Old Regime: Gross Salary Rs. 12L − Standard Deduction Rs. 75K − HRA Exemption (calculated) − 80C Rs. 1.5L − 80D Rs. 25K = Taxable income approximately Rs. 8-9L. Tax at slab rates + 4% cess.
Under New Regime: Gross Salary Rs. 12L − Standard Deduction Rs. 75K = Rs. 11.25L. Tax at new regime slab rates. Rebate under 87A if income ≤ Rs. 12L effectively makes tax = NIL for income up to Rs. 12.75L (with standard deduction).
Example 2 — Business Person (Presumptive)
Scenario: Amit, retail trader, turnover Rs. 1.5 crore, all digital receipts.
Under 44AD: Deemed profit = 6% of Rs. 1.5 Cr = Rs. 9 lakh (digital receipts rate). No books required, no tax audit. File ITR-4 by July 31. Pay advance tax in single installment by March 15.
Example 3 — Capital Gains on Property
Scenario: Priya sells residential house for Rs. 80 lakh (held 5 years). Purchased for Rs. 40 lakh. Stamp duty value Rs. 85 lakh.
Computation: Sale consideration = higher of actual or stamp duty value = Rs. 85L. Indexed cost (using CII) approximately Rs. 52L. LTCG = Rs. 33L. Tax at 12.5% = Rs. 4.125L + cess. Can claim Section 54 exemption if reinvests in residential house within 2 years or constructs within 3 years.
Applicable Forms and Due Dates
| Form | Purpose | Due Date | Who Files |
|---|---|---|---|
| ITR-1/2/3/4 | Income Tax Return (Individual/HUF) | July 31 / October 31 | Taxpayer |
| Form 16 | TDS Certificate from Employer | June 15 | Employer issues |
| 26AS / AIS | Tax Credit Statement | Available online | Auto-generated |
| 24Q/26Q/27Q | TDS Returns (Quarterly) | 31st of month after quarter | Deductor |
| Form 3CA/3CD | Tax Audit Report | September 30 | CA files |
| Challan 280 | Advance Tax / Self-Assessment Tax | Quarterly / Before filing | Taxpayer |
Penalties and Interest
| Default | Consequence | Rate/Amount | Section |
|---|---|---|---|
| Late filing of return | Penalty | Rs. 5,000 (Rs. 1,000 if income ≤ Rs. 5L) | 234F |
| Late filing interest | Interest | 1% per month on unpaid tax | 234A |
| Short advance tax | Interest | 1% per month on shortfall | 234B |
| Deferment of advance tax | Interest | 1% per month on installment shortfall | 234C |
| Under-reporting income | Penalty | 50% of tax on under-reported income | 270A |
| Misreporting income | Penalty | 200% of tax on misreported income | 270A |
| Non-deduction of TDS | Interest + Penalty | 1% per month (from due date) + prosecution | 201/276B |
| Tax evasion | Prosecution | Imprisonment 6 months to 7 years + fine | 276C |
Judicial Interpretations
Supreme Court: Tax provisions are to be interpreted strictly — neither extended nor restricted beyond their plain meaning. Exemptions must be strictly construed. DTAA provisions override domestic law to the extent beneficial to the assessee (beneficial interpretation).
High Courts / ITAT: Burden of proof for claiming deductions/exemptions is on the assessee. AO cannot make additions without evidence. Principles of natural justice must be followed in assessment proceedings. Faceless assessment orders without proper hearing are quashed.
Compliance Checklist
| # | Action | Timeline | ☐ |
|---|---|---|---|
| 1 | Collect Form 16/16A, 26AS, AIS from all sources | After June 15 | ☐ |
| 2 | Reconcile income with 26AS/AIS — resolve mismatches | Before filing | ☐ |
| 3 | Calculate tax under both regimes — choose beneficial | Before filing | ☐ |
| 4 | Pay any balance tax (self-assessment) before filing | Before filing | ☐ |
| 5 | File ITR in correct form by due date | July 31 / Oct 31 | ☐ |
| 6 | Verify ITR within 30 days (Aadhaar OTP/Net Banking/DSC) | Within 30 days | ☐ |
| 7 | Respond to any CPC intimation under 143(1) | Within 30 days | ☐ |
| 8 | Keep all proofs for 6 years (assessment + 4 years) | Ongoing | ☐ |
Key Facts About 490 IT Act 2025
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
What does Section 486-490 of the Income Tax Act, 2025 provide?
Section 486-490 establishes the legal framework for Section 486-490 SEZ under the Income Tax Act, 2025. It prescribes who must comply, the computation methodology, applicable tax rates, filing requirements, and consequences of non-compliance. The provision must be read with the applicable Income Tax Rules and CBDT notifications for complete compliance guidance.
What is the penalty for non-compliance with Section 486-490?
Penalties depend on the nature of default — under-reporting of income attracts 50% of tax payable on under-reported income (Section 270A equivalent), while misreporting attracts 200%. Late filing of return attracts penalty up to Rs. 5,000 (Rs. 1,000 if income below Rs. 5 lakh). Interest under 234A/234B/234C applies at 1% per month for delayed filing, short payment of advance tax, and deferment of advance tax installments respectively.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
490 IT Act 2025: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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