Section 145 of the Income-tax Act, 2025 — Deduction for the Business of Collecting and Processing Biodegradable Waste

In plain language

What Section 145 says in plain English

Section 145 of the Income-tax Act, 2025 gives a 100% tax deduction on the profits and gains earned by a business that collects and then processes or treats biodegradable waste to turn it into something useful — such as power, biogas, bio-fertilizers, bio-pesticides, or fuel pellets. In simple words, if your business takes organic/rotting waste (kitchen waste, agricultural residue, animal dung, etc.) and converts it into energy or eco-products, the income from that activity can be made fully tax-free for five years.

This section is the Income-tax Act, 2025 version of the old Section 80JJA of the Income-tax Act, 1961. The 2025 Act renumbered and re-drafted the deductions in simpler language, but the core benefit is carried forward substantially unchanged.

Who can claim it

• Any assessee — an individual, HUF, firm, LLP or company — carrying on the eligible business is covered; there is no restriction on the type of person.
• The gross total income must include profits and gains from the specified biodegradable-waste business. If there is no such profit, there is nothing to deduct.
• Both collecting and processing/treating should be part of the business — the activity of converting the waste into an eligible output is the heart of the deduction.

Which activities qualify

The deduction applies where biodegradable waste is collected and processed or treated for any of the following:

• Generating power (waste-to-energy plants).
• Producing bio-fertilizers, bio-pesticides or other biological agents.
• Producing bio-gas.
• Making pellets or briquettes for fuel, or organic manure.

How much and for how long

• Quantum: The deduction equals the whole amount of profits and gains derived from the eligible business — effectively a 100% deduction, so the qualifying income becomes tax-free.
• Period: It is available for five consecutive tax years, starting with the tax year in which the business commences. Once the five years lapse, the benefit cannot be extended or carried forward.
• Historically, an older form of Section 80JJA (before 1998) had a monetary cap. The current framework and Section 145 allow the full profit with no such ceiling — but keep supporting records ready, since figures can vary and the rules should be confirmed with the final Finance Act text.

How it interacts with other provisions

• Being a Chapter VIII / deduction-from-gross-total-income type benefit, the deduction cannot exceed the gross total income and cannot create or increase a loss.
• If you also claim other profit-linked deductions, the same profits cannot be deducted twice — no double-dipping.
• Maintain proper books of account; the profit of the eligible unit must be separately identifiable.

Practical implications

This is a strong incentive for the green economy — municipal waste-to-energy plants, gaushala biogas units, compost/organic-manure makers and briquette manufacturers. Because the window is only five years from commencement, timing matters: launch when the plant is genuinely operational and profitable so you actually capture five profitable years, not five loss-making ones.