Section 33B of Income Tax Act 1961: Rehabilitation Allowance

Section 33B of the Income-tax Act, 1961 provided a rehabilitation allowance where an industrial undertaking in India had to discontinue business because specified assets were extensively damaged or destroyed by certain calamities, disturbances, accidents or enemy action, and the business was subsequently re-established, reconstructed or revived within the prescribed period.

Current legal position: Section 33B is a historical provision for present-day readers. Its own proviso states that no deduction under the section is allowable for the assessment year beginning on 1 April 1985 or any subsequent assessment year. In addition, the Income-tax Act, 2025 came into force on 1 April 2026 and replaced the Income-tax Act, 1961 as the current income-tax statute. This page is therefore retained for historical, transitional and research reference, not as a current deduction claim guide.

What did Section 33B provide?

The provision applied where the business of an industrial undertaking carried on in India was discontinued in a previous year because of extensive damage to, or destruction of, a building, machinery, plant or furniture owned by the assessee and used for that business. The damage or destruction had to result directly from one of the events specified in the section.

Requirement	Section 33B rule
Business	Business of an industrial undertaking carried on in India.
Affected assets	Building, machinery, plant or furniture owned by the assessee and used for the business.
Specified causes	Natural convulsion; riot or civil disturbance; accidental fire or explosion; or enemy action and action taken in combating an enemy.
Revival period	The business had to be re-established, reconstructed or revived before expiry of three years from the end of the previous year in which it was discontinued.
Historical allowance	60% of the amount of the deduction allowable under the then applicable Section 32(1)(iii) in respect of the damaged or destroyed assets.
Statutory cutoff	No deduction under Section 33B for AY 1985-86 or any subsequent assessment year.

Events covered by the provision

For the historical allowance to operate, discontinuance of the business had to arise directly from one or more of these statutory causes:

Flood, typhoon, hurricane, cyclone, earthquake or another convulsion of nature.
Riot or civil disturbance.
Accidental fire or explosion.
Action by an enemy, or action taken in combating an enemy, whether or not war had formally been declared.

Three-year condition for re-establishment or revival

The allowance was linked to restoration of the affected business. After discontinuance, the assessee had to re-establish, reconstruct or revive the business before the expiry of three years from the end of the relevant previous year. The deduction was associated with the previous year in which that re-establishment, reconstruction or revival occurred.

Amount of the historical rehabilitation allowance

Section 33B prescribed an allowance equal to 60% of the amount of the deduction allowable under clause (iii) of Section 32(1), as that provision then operated, in respect of the building, machinery, plant or furniture damaged or destroyed.

Important: The 60% formula should not be read as a presently available deduction. Section 33B itself closed the allowance for AY 1985-86 and later assessment years.

Meaning of industrial undertaking under Section 33B

For this section, an industrial undertaking meant an undertaking mainly engaged in any of the following activities:

generation or distribution of electricity or any other form of power;
construction of ships;
manufacture or processing of goods; or
mining.

Why Section 33B is now mainly of historical relevance

Two points are important when reading this provision today. First, the proviso built into Section 33B stopped the rehabilitation allowance from AY 1985-86 onward. Second, with effect from 1 April 2026, the Income-tax Act, 2025 became the operative income-tax legislation. Accordingly, Section 33B of the 1961 Act should be cited with its historical and transitional context rather than presented as a current tax benefit.

Related carry-forward rule under the old Act

Section 72 of the Income-tax Act, 1961 also referred to a business covered by Section 33B for specified carry-forward treatment where such a business was discontinued and later re-established, reconstructed or revived within the period referred to in Section 33B. That cross-reference is useful when researching historical assessments and disputes under the repealed regime.

Official references

For current law, readers should consult the official Income Tax Department materials for the Income-tax Act, 2025 and Income-tax Rules, 2026. For the legacy text and historical research, see the Income Tax Department's Income-tax Act, 1961 reference text.

This article is intended for legal and tax information. Historical provisions may remain relevant to older proceedings, savings provisions and litigation depending on the applicable tax period and transitional law.