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Unit 7: Deductions: For Special Conditions
Gopika Juneja, Lovely Professional University

Unit 7: Deductions: For Special Conditions Notes

CONTENTS

Objectives
Introduction
7.1 Key Tax Benefits for SEZs and SEZ Units

7.2 Deductions by an Undertaking Engaged in Development of SEZ
7.3 Special Provisions in Respect of Certain Undertakings in Special Category States
7.4 Provisions for Tax Holiday
7.5 Application of the Above Special Conditions
7.6 Summary
7.7 Keywords
7.8 Review Questions
7.9 Further Readings

Objectives

After studying this unit, you will be able to:
State the meaning of SEZ

Discuss the key tax benefits to be provided to SEZs and SEZ Units

Recognise the deduction in respect of profits and gains by an undertaking or enterprise
engaged in development of SEZ
Interpret the special provisions in respect of certain undertakings or enterprises in certain
special category states

Elucidate tax holiday in respect of profits and gains from eligible business of certain
undertakings in north-eastern states
Demonstrate the application of the above special conditions

Introduction

A Special Economic Zone (SEZ) is a specified, delineated and duty-free geographical region
that has different economic laws from those of the country in which it is situated. In some
countries, such a region is even treated as a deemed foreign territory. Therefore you can say
that SEZs are free trade zones, having completely different set of administrative and taxation
laws outside the purview of customs authorities. Traditionally SEZs are created as open markets
within an economy that is dominated by distortional trade, macro and exchange regulations
and other regulatory governmental controls. SEZs are believed to create conducive environment
to promote investment and exports. Hence, many developing countries are developing SEZs
with the expectation that they will provide the engines of growth for their economies to achieve
industrialisation.
The Special Economic Zones and Tax Incentives offered as per the SEZ policy of India are indeed
alluring. The Special Economic Zones and Tax Incentives offered covers areas like state and local
taxes, levies, stamp duty and other duties. As per the Income-tax Act, 1961 there are a number of
key tax benefits to be provided to SEZs and SEZ Units.

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