Section 80HHE: Deduction for Profits from Export of Computer Software
Section 80HHE of the Income-tax Act, 1961 provided a deduction for eligible profits from exports of computer software and certain software-development services performed outside India. The deduction was phased out and is unavailable for current assessment years.
Meaning and eligibility under Section 80HHE
Section 80HHE(1) applied to an Indian company or a resident person other than a company carrying on the business of (a) exporting computer software outside India or transmitting it from India to another country by any means, or (b) providing technical services outside India connected with developing or producing computer software.
The explanation to subsection (1) expressly treated profits from on-site development of software outside India, including related development services, as profits derived from exporting computer software.
Section 80HHE(1A) separately addressed an eligible supporting software developer that developed and sold software to an exporting company holding the prescribed certificate. The exporting company had to reduce its own deduction in proportion to the export turnover allocated to that developer, preventing duplication.
From 1 April 2026 the Income-tax Act, 2025 governs the new tax-year framework. The expired historical deduction does not reappear merely because software exports continue.
Historical Section 80HHE deduction rates
| Assessment year | Deduction from qualifying export profits |
|---|---|
| 2001-02 | 80% |
| 2002-03 | 70% |
| 2003-04 | 50% |
| 2004-05 | 30% |
| 2005-06 onwards | No deduction allowed |
These are the final phased-out rates in Section 80HHE(1B). For assessment years before 2001-02, the rate and applicable amendments must be checked against the historical law for the year concerned.
How eligible export profits were computed
Under Section 80HHE(3), qualifying export profits were calculated broadly as:
The statutory definitions governed each element. Profits of the business were computed under the business-income head and reduced by 90% of specified receipts such as brokerage, commission, interest, rent and similar charges, and by profits of overseas branches, offices, warehouses or other establishments.
Export turnover generally meant qualifying software export consideration received in convertible foreign exchange, excluding attributable freight, telecommunication and insurance charges for delivery abroad, and foreign-currency expenses on technical services outside India. The definition of total turnover contained corresponding exclusions and exclusions for specified Section 28 export incentives.
Supporting software developers: Section 80HHE(3A)
Where the supporting developer's business consisted exclusively of developing and selling software to qualifying exporting companies, its relevant business profits were the starting point. Where it had other customers or activities, eligible profits were apportioned using qualifying sales turnover divided by total business turnover. The statutory certification and non-duplication rules still applied.
Foreign exchange, accountant reports and restrictions
- Section 80HHE(2): Software export consideration generally had to be received in or brought into India in convertible foreign exchange within six months after the previous year, or within an extended period permitted by the competent authority.
- Approved overseas bank account: Consideration credited to a separate account with a bank outside India could be deemed received in India where maintained with Reserve Bank of India approval under the relevant explanation.
- Section 80HHE(4): The exporting assessee had to furnish the prescribed accountant's report supporting the deduction, in accordance with the requirements applicable to the assessment year.
- Section 80HHE(4A): A supporting developer needed an accountant's report and the prescribed exporting-company certificate confirming that the exporter had not claimed the relevant turnover; auditor certification applied.
- Section 80HHE(5): Profits on which the deduction was allowed could not receive another deduction under a different provision of the Act for the same or any other assessment year.
Important definitions in Section 80HHE
Computer software
Computer software covered a computer program recorded on a disc, tape, perforated medium or other information-storage device, as well as notified customised electronic data and products or services of a similar nature, transmitted or exported outside India by any means.
Convertible foreign exchange
The expression referred to the meaning assigned under Section 80HHC, with reference to foreign exchange treated as convertible by the Reserve Bank of India under applicable foreign exchange law.
Exporting company
An exporting company was a company covered by subsection (1) that actually exported computer software.
Supporting software developer
A supporting software developer was an Indian company or a resident non-company person developing and selling computer software to an exporting company for export.
Official sources and related deductions
For the historical statute, amendments and foreign exchange rules, consult the Income Tax Department, India Code and Reserve Bank of India. For current filing guidance, consult the Income Tax e-Filing Portal.
Related historical incentives include Section 80HHC (goods exports), Section 80HHD (foreign-tourist earnings) and Section 80HHF (film software and related exports).
Frequently asked questions
Can Section 80HHE be claimed for software exports in 2026?
No. The deduction ceased from assessment year 2005-06 onward.
What were the final Section 80HHE deduction rates?
80% for AY 2001-02, 70% for AY 2002-03, 50% for AY 2003-04 and 30% for AY 2004-05.
Did on-site software development outside India qualify?
The provision deemed profits from on-site development of computer software outside India, including software-development services, to be software export profits.
Was receipt of convertible foreign exchange required?
Yes. The applicable export consideration generally had to be received in or brought into India within six months from the end of the previous year or a permitted extended period.
Could an exporting company and supporting software developer claim the same profits?
No. The exporter deduction was reduced for turnover certified for a supporting software developer, and prescribed certificates and accountant reports applied.
Updated 10 October 2026. Historical claims require examination of the statutory text, rules and amendments applicable to the relevant assessment year.