One-tenth does not guarantee an unrestricted annual claim
For tax year 2026–27, section 51 of the Income-tax Act, 2025 provides amortisation of qualifying mineral-prospecting expenditure. The annual instalment is restricted by the specified commercial-exploitation income, while unused instalments have a carry-forward mechanism ending at the tenth tax year from commencement of commercial production. This guide was checked on 28 October 2026 and does not apply new section numbers to FY 2025–26 / AY 2026–27 returns. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Establish the person, mineral and commercial-production year
The provision covers an Indian company or a resident person other than a company engaged in the specified operations. Subsection (2) links qualifying expenditure to minerals or associated groups in Schedule XII and to the production year plus the four immediately preceding tax years. Obtain the actual mineral classification and commercial-production evidence rather than treating every mining-related cost as eligible. The statutory definition includes prospecting operations that prove infructuous or abortive, but the expenditure must still satisfy the section's other conditions. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Reduce the pool before computing the instalment
Subsection (3) reduces expenditure for amounts met directly or indirectly by another person or authority and the specified sale, salvage, compensation or insurance receipts relating to property or rights created by it. Subsection (4) excludes acquisition of the mineral site or rights over it, deposits or rights over deposits, and the specified depreciable capital assets. Use invoice-level categories to prevent the same item being removed twice or claimed through both depreciation and this pool. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Use the correct exploitation-income cap
Subsection (5) limits the annual deduction to the smaller of the applicable instalment and the stated income before this deduction arising from commercial exploitation of the relevant mineral or group. The source of that exploitation need not be the very operation on which the qualifying expenditure was incurred, but it must fall within the statutory mineral linkage. Unrelated business income is not automatically a substitute. Retain a mineral-wise income bridge, not merely the company's total profit. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Carry unused instalments within the original window
Under subsection (6), an unallowed part moves into the following year's instalment, subject to the final tenth-year restriction. Keep an opening-unused balance, current instalment, amount absorbed and closing balance for each year. Do not start a fresh ten-year period when an instalment is first restricted or when a later tax framework begins. The examples assume a new eligible commercial-production year of 2026–27 where the calendar illustration requires it. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Preserve special conditions and reorganisation evidence
Subsection (7) imposes its additional audit and reporting condition on the specified persons other than companies or co-operative societies; it must not mechanically be presented as the same additional condition for every Indian company. Subsection (8) provides the stated continuity for qualifying transfers between Indian companies in amalgamation or demerger, without a deduction to the transferor in that transfer year. Subsection (9) prevents a second deduction elsewhere. These models assume an ordinary eligible Indian-company case and do not invent an audit form or reorganisation exception. Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10).
Applicable primary references
Income-tax Act, 2025 as amended by Finance Act 2026: section 51(1)–(10)
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Filter the expenditure pool
Assume total recorded expenditure ₹1,20,00,000 includes a distinct ₹30,00,000 site-acquisition cost and ₹20,00,000 met by another authority, with no overlapping categories or further exclusion. Eligible pool is ₹70,00,000 and one-tenth instalment ₹7,00,000, subject to the remaining conditions.
Illustrative example 2: Account for a qualifying recovery
Assume a ₹70,00,000 otherwise eligible pool must be reduced by a distinct ₹5,00,000 salvage receipt within subsection (3). Net pool is ₹65,00,000 and annual base instalment ₹6,50,000. A generic bank receipt without the necessary statutory link would need separate analysis.
Illustrative example 3: Income restricts the first instalment
Assume base instalment ₹6,50,000 and correctly computed relevant exploitation income ₹4,00,000. Deduction is ₹4,00,000, leaving unused instalment ₹2,50,000 for the statutory next-year working within the original window.
Illustrative example 4: Next-year absorption
Assume the next relevant year has base instalment ₹6,50,000 plus valid unused opening amount ₹2,50,000 and relevant income ₹12,00,000. Available instalment is ₹9,00,000, all absorbed; closing unused amount is zero on these facts.
Illustrative example 5: Final-year restriction
Assume the final relevant year has total available instalment ₹14,00,000 and relevant income ₹5,00,000. Deduction is ₹5,00,000. Remaining ₹9,00,000 cannot be carried beyond the statutory tenth-year boundary merely because it was not absorbed.
Illustrative example 6: Count the original years
Assume commercial production begins in tax year 2026–27. Counting that as year one makes 2035–36 year ten: 2035 − 2026 + 1 = 10. A restriction in year three does not move the original year-ten endpoint to 2037–38.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Confirm the taxpayer population | Indian-company or other statutory eligibility |
| 2 | Identify the mineral or group | Schedule XII classification evidence |
| 3 | Establish commercial production | Supported commencement tax year |
| 4 | Test the expenditure window | Production year and four preceding years |
| 5 | Classify excluded acquisitions | Site, deposits, rights and depreciable assets |
| 6 | Reconcile funding and recoveries | Subsection (3) reductions without overlap |
| 7 | Compute the base instalment | Net eligible pool divided by ten |
| 8 | Establish relevant income | Mineral-linked exploitation income before this deduction |
| 9 | Reconcile unused instalments | Opening, annual amount, absorption and closing balance |
| 10 | Check the final year and special facts | Original tenth year, audit population and reorganisation conditions |
Sixteen practitioner FAQs
1. Which tax year does this guide address?
Tax year 2026–27 under the 2025 Act.
2. Does every foreign company qualify merely by mining in India?
Subsection (1) specifies an Indian company or the stated resident non-company person.
3. Which mineral classification matters?
Schedule XII's specified minerals and associated groups.
4. What expenditure years are covered?
The commercial-production year and four immediately preceding tax years under subsection (2).
5. Can abortive prospecting ever be relevant?
The definition includes infructuous or abortive operations, subject to all other conditions.
6. Does a site purchase automatically enter the pool?
No. Subsection (4) excludes the stated site acquisition and rights.
7. Can specified depreciable capital assets enter this amortisation pool?
The subsection (4) exclusion must be applied.
8. Why reconcile grants or third-party funding?
Subsection (3) requires the stated reductions for expenditure met by others.
9. Do all receipts reduce the pool automatically?
Establish the particular statutory link for the specified recovery receipts.
10. Is the basic instalment one-tenth?
Yes, after the required pool reductions and exclusions.
11. Can unrelated business profit automatically support absorption?
No. Apply the specified mineral-exploitation-income test.
12. Can unused instalments move to the next year?
Subsection (6) provides the stated mechanism within the original window.
13. Does each restriction start a new ten-year clock?
No. Preserve the original commercial-production year.
14. Can unused amounts continue beyond the tenth relevant year?
The subsection (6) boundary prohibits that continuation.
15. Is subsection (7)'s additional reporting population every company?
No. Read its express non-company and non-co-operative-society wording.
16. Can the same expenditure be deducted elsewhere as well?
Subsection (9) prevents the covered double deduction.
Conclusion
Build the eligible mineral-prospecting expenditure pool, cap each instalment against the specified exploitation income and track unused amounts within the ten-year window.