Section 94B → Section 193
Limitation on interest deduction in certain cases (Thin Capitalisation)
Quick Answer
Section 94B of the Income Tax Act, 1961 (Limitation on interest deduction in certain cases (Thin Capitalisation)) corresponds to Section 193 of the Income-tax Act, 2025, effective 1st April 2026. Status: Retained.
What changed for Section 94B
Under the Income Tax Act, 1961, Section 94B governs limitation on interest deduction in certain cases (thin capitalisation). Restricts interest deduction to 30% of EBITDA for interest paid to associated enterprises (to prevent profit shifting via heavy debt).
From 1st April 2026, the same subject sits at Section 193 of the Income-tax Act, 2025 — retained and renumbered as Section 193 of the Income-tax Act, 2025. Retained. Protects the Indian tax base from highly leveraged foreign MNC subsidiaries.
For Section 94B, the practical impact is rated Critical. Forces MNCs to inject equity rather than just debt into their Indian operations.
Sec 94B
Provision Summary
Restricts interest deduction to 30% of EBITDA for interest paid to associated enterprises (to prevent profit shifting via heavy debt).
Sec 193
Provision Summary
Retained. Protects the Indian tax base from highly leveraged foreign MNC subsidiaries.
Key Changes & Highlights
- Carry forward of disallowed interest for 8 years is maintained, but tracked securely via portal.
Frequently Asked Questions
What is Section 94B of the Income Tax Act, 1961 about?
Section 94B of the Income Tax Act, 1961 covers limitation on interest deduction in certain cases (thin capitalisation). Restricts interest deduction to 30% of EBITDA for interest paid to associated enterprises (to prevent profit shifting via heavy debt).
Which section replaces Section 94B in the Income-tax Act, 2025?
Section 94B of the Income Tax Act, 1961 maps to Section 193 of the Income-tax Act, 2025, effective 1st April 2026 (status: Retained). Retained. Protects the Indian tax base from highly leveraged foreign MNC subsidiaries.
What is the impact of the change to Section 94B under the new tax code?
The transition impact for Section 94B is rated Critical. Forces MNCs to inject equity rather than just debt into their Indian operations.
What should I watch out for when Section 94B moves to the 2025 code?
Carry forward of disallowed interest for 8 years is maintained, but tracked securely via portal. These points are specific to Section 94B (Limitation on interest deduction in certain cases (Thin Capitalisation)).
Disclaimer: This mapping of Section 94B (Limitation on interest deduction in certain cases (Thin Capitalisation)) to Section 193 of the Income-tax Act, 2025 is for educational and reference purposes only, based on publicly available drafts and circulars. As Section 94B is currently marked Retained, always confirm its treatment with a qualified Chartered Accountant before filing or making compliance decisions.
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