The Assessing Officer has reduced my client's s.10AA export turnover by freight and insurance. What exactly does the definition exclude, and is there a time limit for bringing the money in?
Both the current definition of "export turnover" and the six-month realisation condition date from the Finance Act 2023 and apply from AY 2024-25. "Export turnover" in Explanation 1 to s.10AA is the consideration for export by the Unit of articles or things or services received in, or brought into, India in convertible foreign exchange in accordance with s.10AA(4A), and it excludes four things: freight, telecommunication charges and insurance attributable to the delivery of the articles or things outside India, and expenses incurred in foreign exchange in rendering services (including computer software) outside India. Separately and independently, from AY 2024-25 s.10AA(4A) makes the section apply to a Unit only if the sale or service proceeds are received in, or brought into, India in convertible foreign exchange within six months from the end of the previous year or such further period as the Reserve Bank of India (or the authority regulating foreign exchange) may allow.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2024-04-01, reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; https://incometaxindia.gov.in/w/section-10aa. It bears on section 10AA, section 10AA(4A), section 10AA(7), section 10A of the Income Tax Act 1961, in Capital Gains Exemptions and Deductions & Disallowances matters.
Two things go wrong in practice. The first is that officers reduce export turnover by the four excluded items but leave total turnover untouched, which inflates the denominator of the s.10AA(7) fraction and cuts the deduction; the settled answer to that is the parity rule in the Supreme Court's decision in CIT v HCL Technologies Ltd, already in the library, that what is excluded from export turnover must also be excluded from total turnover. The second is that s.10AA(4A), which applies only from AY 2024-25, is missed altogether. It is not a computation rule but an application rule — it says "This section applies to a Unit, if" — so a failure to realise within six months, without an extension, is a threshold objection and not merely a quantum adjustment. Explanation 2 to s.10AA(4A) gives a limited deeming: proceeds credited to a separate account maintained abroad with RBI approval are deemed received in India. Note also that the s.10AA(7) denominator is the total turnover of the business carried on by the undertaking, not the turnover of the assessee as a whole, so the fraction is computed unit-wise.
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This is a statement of the statutory position, not a case. The text relied on is section 10AA as printed on the Income Tax Department's section page carrying the stamp "Year: 2026", fetched twice on 8 September 2026 with identical wording on both passes. Explanation 1 clause (ia) reads: "'export turnover' means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee in convertible foreign exchange in accordance with the provisions of sub-section (4A), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India". Sub-section (4A) reads: "This section applies to a Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf." Explanation 1 to that sub-section defines "competent authority" as the Reserve Bank of India or the authority authorised under any law for the time being in force for regulating payments and dealings in foreign exchange; Explanation 2 deems the sale of goods or provision of services to have been received in India where the export turnover is credited to a separate account maintained for that purpose with a bank outside India with RBI approval. Sub-section (7) provides that the profits derived from export shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover bears to the total turnover of the business carried on by the undertaking. Explanation 2 to the section deems profits from on-site development of computer software outside India to be profits derived from the export of computer software outside India.
Statutory position. From AY 2024-25: Export turnover for s.10AA is convertible-foreign-exchange consideration received in or brought into India in accordance with s.10AA(4A), reduced by freight, telecommunication charges and insurance attributable to delivery of the articles or things outside India, and by expenses incurred in foreign exchange in rendering services (including computer software) outside India. Section 10AA(4A) is expressed as a condition of the section applying to the Unit at all, and requires realisation in convertible foreign exchange within six months of the end of the previous year unless the Reserve Bank of India or the foreign exchange regulating authority allows a further period. Under s.10AA(7) the export profit is the profit of the business of the undertaking multiplied by export turnover over the total turnover of the business carried on by the undertaking.
Not a decided case. The definition ties export turnover back to s.10AA(4A), so the six-month realisation requirement operates twice over — once as a condition of the section applying and once as part of the definition of the numerator in the s.10AA(7) fraction. The four exclusions are all delivery-side or rendering-side costs incurred outside India, which is why the settled reading is that they are equally outside the denominator; the section itself does not define total turnover, which is the gap the parity rule fills.
This section applies to a Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf.
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Handle my notice → Ask a CA on WhatsAppBoth the current definition of "export turnover" and the six-month realisation condition date from the Finance Act 2023 and apply from AY 2024-25. "Export turnover" in Explanation 1 to s.10AA is the consideration for export by the Unit of articles or things or services received in, or brought into, India in convertible foreign exchange in accordance with s.10AA(4A), and it excludes four things: freight, telecommunication charges and insurance attributable to the delivery of the articles or things outside India, and expenses incurred in foreign exchange in rendering services (including computer software) outside India. Separately and independently, from AY 2024-25 s.10AA(4A) makes the section apply to a Unit only if the sale or service proceeds are received in, or brought into, India in convertible foreign exchange within six months from the end of the previous year or such further period as the Reserve Bank of India (or the authority regulating foreign exchange) may allow. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 10AA, section 10AA(4A), section 10AA(7), section 10A of the Income Tax Act 1961. It is reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; https://incometaxindia.gov.in/w/section-10aa. Two things go wrong in practice. The first is that officers reduce export turnover by the four excluded items but leave total turnover untouched, which inflates the denominator of the s.10AA(7) fraction and cuts the deduction; the settled answer to that is the parity rule in the Supreme Court's decision in CIT v HCL Technologies Ltd, already in the library, that what is excluded from export turnover must also be excluded from total turnover. The second is that s.10AA(4A), which applies only from AY 2024-25, is missed altogether. It is not a computation rule but an application rule — it says "This section applies to a Unit, if" — so a failure to realise within six months, without an extension, is a threshold objection and not merely a quantum adjustment. Explanation 2 to s.10AA(4A) gives a limited deeming: proceeds credited to a separate account maintained abroad with RBI approval are deemed received in India. Note also that the s.10AA(7) denominator is the total turnover of the business carried on by the undertaking, not the turnover of the assessee as a whole, so the fraction is computed unit-wise. If it applies to you, the first step is this: Ask the officer to identify, item by item, which of the four excluded heads he says the amount falls under; the exclusions for freight, telecommunication charges and insurance are limited to amounts attributable to the delivery of articles or things OUTSIDE India, and the services exclusion is limited to expenses incurred in foreign exchange in rendering services outside India.
This is a statement of the statutory position, not a case. The text relied on is section 10AA as printed on the Income Tax Department's section page carrying the stamp "Year: 2026", fetched twice on 8 September 2026 with identical wording on both passes. Explanation 1 clause (ia) reads: "'export turnover' means the consideration in respect of export by the undertaking, being the Unit of articles or things or services received in, or brought into, India by the assessee in convertible foreign exchange in accordance with the provisions of sub-section (4A), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things outside India or expenses, if any, incurred in foreign exchange in rendering of services (including computer software) outside India". Sub-section (4A) reads: "This section applies to a Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf." Explanation 1 to that sub-section defines "competent authority" as the Reserve Bank of India or the authority authorised under any law for the time being in force for regulating payments and dealings in foreign exchange; Explanation 2 deems the sale of goods or provision of services to have been received in India where the export turnover is credited to a separate account maintained for that purpose with a bank outside India with RBI approval. Sub-section (7) provides that the profits derived from export shall be the amount which bears to the profits of the business of the undertaking, being the Unit, the same proportion as the export turnover bears to the total turnover of the business carried on by the undertaking. Explanation 2 to the section deems profits from on-site development of computer software outside India to be profits derived from the export of computer software outside India. The matter was decided on 2024-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. Statutory position. From AY 2024-25: Export turnover for s.10AA is convertible-foreign-exchange consideration received in or brought into India in accordance with s.10AA(4A), reduced by freight, telecommunication charges and insurance attributable to delivery of the articles or things outside India, and by expenses incurred in foreign exchange in rendering services (including computer software) outside India. Section 10AA(4A) is expressed as a condition of the section applying to the Unit at all, and requires realisation in convertible foreign exchange within six months of the end of the previous year unless the Reserve Bank of India or the foreign exchange regulating authority allows a further period. Under s.10AA(7) the export profit is the profit of the business of the undertaking multiplied by export turnover over the total turnover of the business carried on by the undertaking.
Not a decided case. The definition ties export turnover back to s.10AA(4A), so the six-month realisation requirement operates twice over — once as a condition of the section applying and once as part of the definition of the numerator in the s.10AA(7) fraction. The four exclusions are all delivery-side or rendering-side costs incurred outside India, which is why the settled reading is that they are equally outside the denominator; the section itself does not define total turnover, which is the gap the parity rule fills. In the words reproduced by the source cited on this page: "This section applies to a Unit, if the proceeds from sale of goods or provision of services is received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf."
It was decided by the CBDT Circulars & Instructions on 2024-04-01 and is reported as Section 10AA as printed on the Income Tax Department's section page, "Year: 2026"; https://incometaxindia.gov.in/w/section-10aa. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 10AA, section 10AA(4A), section 10AA(7), section 10A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Statutory position. From AY 2024-25: Export turnover for s.10AA is convertible-foreign-exchange consideration received in or brought into India in accordance with s.10AA(4A), reduced by freight, telecommunication charges and insurance attributable to delivery of the articles or things outside India, and by expenses incurred in foreign exchange in rendering services (including computer software) outside India. Section 10AA(4A) is expressed as a condition of the section applying to the Unit at all, and requires realisation in convertible foreign exchange within six months of the end of the previous year unless the Reserve Bank of India or the foreign exchange regulating authority allows a further period. Under s.10AA(7) the export profit is the profit of the business of the undertaking multiplied by export turnover over the total turnover of the business carried on by the undertaking. It arises in Capital Gains Exemptions and Deductions & Disallowances matters, on section 10AA, section 10AA(4A), section 10AA(7), section 10A of the Income Tax Act 1961, and was decided by Not applicable — statutory text. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Whatever is knocked out of export turnover, insist it comes out of total turnover as well, relying on CIT v HCL Technologies Ltd (already in the library). Check the s.10AA(7) denominator: it is the total turnover of the business carried on by the undertaking, so turnover of the assessee's other units does not belong in it. For AY 2024-25 onwards, pull the FIRC or bank realisation certificates for every export invoice and check realisation against six months from the end of the previous year; where realisation is late, obtain and produce the RBI or authorised dealer extension, because s.10AA(4A) is an application condition and not a quantum adjustment. For AY 2024-25 onwards, where proceeds are held in a foreign bank account, produce the RBI approval for the separate account and rely on Explanation 2 to s.10AA(4A).
Still good law. This is the text as the Income Tax Department printed it on 8 September 2026 under the stamp "Year: 2026", transcribed on two separate fetches with identical wording. No later amendment was checked for and none is asserted; the page carries no amendment footnote list beyond the Finance (No. 2) Act 2009 proviso printed inside s.10AA(7). No case law on s.10AA(4A) was read. The commencement of sub-section (4A) and of the clause (ia) lettering (Act No. 8 of 2023, w.e.f. 1-4-2024) is established from footnotes on the departmental page stamped Year: 2024 (No. 2). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Dating first, because it changes the advice. Sub-section (4A) and the present clause lettering of Explanation 1 were both introduced by the Finance Act 2023 (Act No. 8 of 2023) with effect from 1 April 2024 and therefore apply from AY 2024-25. The departmental page stamped Year: 2024 (No. 2) (/w/section-10aa-19) carries footnote [76], "Ins. by the Act No. 8 of 2023, w.e.f. 1-4-2024", against sub-section (4A), and footnote [77], "Clauses (i) and (ia) sub. for clause (i) by the Act No. 8 of 2023, w.e.f. 1-4-2024". This brackets cleanly: the page stamped Year: 2022 (/w/section-10aa-16) has no sub-section (4A) at all and defines "export turnover" at clause (i); the pages stamped Year: 2023 and Year: 2024 (No. 1) have both. decided_on is that commencement date, not a decision date. It follows that the brief's citation of "Explanation 1(i)" for the export turnover definition is correct for every assessment year up to and including AY 2023-24 and wrong only from AY 2024-25, when the definition moved to clause (ia) and a new clause (i) ("convertible foreign exchange") was inserted ahead of it — cite the clause that matches the year. For a year before AY 2024-25 there is no six-month realisation condition inside s.10AA at all, and the pre-2024 definition of export turnover is not tied to sub-section (4A); do not carry this entry back into those years. The proviso to s.10AA(7) records that the sub-section as amended by section 6 of the Finance (No. 2) Act, 2009 (33 of 2009) has effect for the assessment year beginning on 1 April 2006 and subsequent assessment years. I read no judgment on s.10AA(4A) and none is cited; the parity rule referred to is the Supreme Court decision already in the library and was not re-read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Statutory position. From AY 2024-25: Export turnover for s.10AA is convertible-foreign-exchange consideration received in or brought into India in accordance with s.10AA(4A), reduced by freight, telecommunication charges and insurance attributable to delivery of the articles or things outside India, and by expenses incurred in foreign exchange in rendering services (including computer software) outside India. Section 10AA(4A) is expressed as a condition of the section applying to the Unit at all, and requires realisation in convertible foreign exchange within six months of the end of the previous year unless the Reserve Bank of India or the foreign exchange regulating authority allows a further period. Under s.10AA(7) the export profit is the profit of the business of the undertaking multiplied by export turnover over the total turnover of the business carried on by the undertaking.
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