Section 35ABA of Income Tax Act 1961: Spectrum Expenditure Deduction
Section 35ABA governed the amortised deduction of capital expenditure actually paid for acquiring the right to use spectrum for telecommunication services under the Income-tax Act, 1961. The provision remains important for earlier years and for transitional deductions, although the Income-tax Act, 2025 now governs tax years beginning on or after 1 April 2026.
What did Section 35ABA provide?
Section 35ABA of the Income-tax Act, 1961 applied where an assessee incurred capital expenditure to acquire a right to use spectrum for telecommunication services and payment was actually made for that right. The expenditure could have been incurred before commencement of the telecom business or after commencement.
Instead of allowing the qualifying spectrum expenditure as a single deduction, the section spread the deduction over the period for which the spectrum right remained in force. For each relevant previous year, the allowable amount was the appropriate fraction of the qualifying expenditure.
Core conditions for deduction under Section 35ABA
For the old Section 35ABA deduction, the expenditure had to be capital in nature, relate to acquisition of a right to use spectrum for telecommunication services, and satisfy the requirement concerning actual payment. The deduction then operated across the relevant previous years according to the appropriate fraction.
Definitions used in Section 35ABA
Relevant previous years
If the spectrum fee was actually paid before commencement of the telecom business, the relevant period began with the previous year in which the business commenced. In other cases, it began with the previous year in which the spectrum fee was actually paid. It then extended through the subsequent previous year or years during which the spectrum remained in force.
Appropriate fraction
The appropriate fraction was one divided by the total number of relevant previous years. This mechanism spread the qualifying expenditure evenly over the applicable statutory period.
Payment has actually been made
For Section 35ABA, this expression referred to actual payment of the expenditure irrespective of the previous year in which the liability was incurred according to the regularly employed method of accounting, or payment in the prescribed manner.
Failure to comply with Section 35ABA
Where a deduction had been claimed and granted under Section 35ABA(1) and there was a subsequent failure to comply with the section, the deduction was treated as wrongly allowed. The Assessing Officer could recompute the total income for the relevant previous year and make the necessary rectification. Section 154 applied for this purpose, with the special four-year period reckoned from the end of the previous year in which the failure occurred.
How Section 35ABB applied to spectrum expenditure
Section 35ABA(2) incorporated sub-sections (2) to (8) of Section 35ABB by treating references to a licence as references to spectrum. These linked rules addressed matters such as transfer of the relevant right and specified corporate reorganisations. For a transaction involving transfer, amalgamation or demerger, the linked provisions should therefore be read together with Section 35ABA for the applicable old-law year.
Current law: Section 52 of the Income-tax Act, 2025
For tax years beginning on or after 1 April 2026, the Income-tax Act, 2025 applies. Section 52 consolidates deferred expenditure allowances and specifically covers capital expenditure actually paid for acquiring a right to use spectrum for telecommunication services.
| Point | Current treatment under Section 52 |
|---|---|
| Qualifying expenditure | Capital expenditure incurred and actually paid for acquiring the right to use spectrum for telecommunication services. |
| Initial tax year | The tax year in which the telecom business commences or the spectrum fee is actually paid, whichever is later. |
| Deduction period | The number of tax years from the initial tax year through the tax year up to which the spectrum remains in force. |
| Transfer and reorganisation | Section 52 contains rules dealing with transfer of spectrum or licence rights and specified amalgamation or demerger situations. |
This means that a new spectrum expenditure question for Tax Year 2026-27 or a later tax year should ordinarily be examined under the Income-tax Act, 2025 rather than treated as a fresh claim under Section 35ABA of the repealed 1961 Act.
What happens to an unfinished Section 35ABA deduction?
Section 536(2)(s) of the Income-tax Act, 2025 protects eligible deductions that began under Section 35ABA before repeal. Subject to fulfilment of the applicable conditions, the remaining deduction continues for tax years beginning on or after 1 April 2026 and is brought into the deferred revenue expenditure allowance under the corresponding provisions of the 2025 Act.
Accordingly, repeal of the 1961 Act does not by itself cancel the balance of an otherwise eligible multi-year Section 35ABA deduction.
Practical reading of the provision
For a spectrum expenditure claim, first identify the period to which the expenditure and deduction relate. Earlier assessment years remain governed by the relevant provisions of the Income-tax Act, 1961. For tax years beginning on or after 1 April 2026, examine Section 52 of the Income-tax Act, 2025 and, where the deduction originated under the old law, the saving provision in Section 536.
This article is a general legal and tax reference. Application of the provisions depends on the relevant tax year, spectrum terms, payment structure, transfer history and other facts.
Last reviewed: 28 September 2026