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Sukhpreet  Kaur, Lovely Professional University
                                                                               Unit 5: Exemptions and Deductions – II




                      Unit 5: Exemptions and Deductions – II                                    Notes


            CONTENTS
            Objectives
            Introduction

            5.1  Special Provisions in Respect of Newly Established Undertaking in FTZs
                 5.1.1  Conditions to be Fulfilled
                 5.1.2  Deductions
                 5.1.3  Consequences of Amalgamation, Demerger and Section 10A
            5.2  Special Provisions in Respect of Newly Established Undertaking in SEZs

                 5.2.1  Conditions to be Fulfilled
                 5.2.2  Amount of Deduction: A Simplified Explanation
                 5.2.3  Consequences for Amalgamation and Demerger
            5.3  Special Provisions in Respect of Newly Established Undertakings in 100% Export
                 Oriented Units (EOUs)
                 5.3.1  Conditions to be Fulfilled
                 5.3.2  Deductions
                 5.3.3  Consequences for Amalgamation and Demerger
            5.4  Summary

            5.5  Keywords
            5.6  Review Questions
            5.7  Further Readings


          Objectives

          After studying this unit, you will be able to:
               Explain the Special provision in respect of newly established undertaking in FTZ's

               Discuss the Special provision in respect of newly established undertaking in SEZ's
               Describe the Special provision in respect of newly established undertaking in 100% EOUs

          Introduction

          Free Trade Zone, also called Foreign-trade Zone, formerly Free Port, an area within which
          goods may be landed, handled, manufactured or reconfigured, and re-exported without the
          intervention of the customs authorities.
          Section 10AA was inserted in the Income-tax Act, 1961 by the Special Economic Zones Act, 2005
          (the SEZ Act) with effect from 10-2-2006. The section was enacted specially with respect to
          provide tax exemption to the newly established units in the Special Economic Zone (SEZ).
          The Export Oriented Unit (EOU) Scheme, which had been introduced in the early 1980s remains
          in the forefront of country’s export production schemes. The Government amended in November



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