Tax Benefit to the units set up in Special Economic Zone (SEZ)

The Government thus declared that any entrepreneur who sets up business in SEZ will be provided tax concessions .

In order to claim deduction under section 10AA of the Income Tax Act, SEZ units are required to satisfy the following conditions:

1. The entrepreneur should be covered within the provisions of section 2 (j) of the Special Economic Zone Act, 2005;
2. SEZ unit should have commenced its manufacturing activity or provision of service, as the case may be, during the previous year relevant to any assessment year commencing on or after 1st April 2006;
3. SEZ unit is not formed by any splitting up, or the reconstruction of the business that is already in existence;
4. SEZ unit is not formed by any transfer of plant or machinery, previously used for any purpose, to a new business; and
5. Units who have already enjoyed the benefit of deduction under section 10A of the Income Tax Act for a continuous period of 10 years are not eligible to claim deduction under Section 10AA of the Act.
6. The amount of deduction available under this section shall be as follows:
7. 100% of export profit is eligible for the deduction for the first five years.
8. 50% of export profit is eligible for the deduction for the next five years: Amount not exceeding 50% of export profit is eligible for the deduction for the next five years.

7. The condition for allowance of the deduction is that the same has to be debited from the Statement of Profit and Loss and credited to ‘Special Economic Zone Reinvestment Reserve Account’.
8. Also, Section 10AA deduction is allowable from the assessment year relevant to the previous year in which the SEZ unit commences its manufacturing process or commences provision of service, as the case may be.