Income-tax benefits: Benefits to SEZ Units
Other Benefits: Customs and Excise
Other Benefits: FDI
Other Benefits: Banking / Insurance / External Commercial Borrowings
Central Sales Tax
Other Central Enactments
State Taxes
Service Tax
Other Benefits: Stamp duty

1. 100% exemption of profits and gains from business for the first 5 years
2. 50% exemption on profits and gains from business for the next 5 years
3. 50% exemption to the extent that such amounts are re-invested in the SEZ Special Reserve Account
4. If the SEZ Unit has already availed of benefits for 10 years under Section 10A of the ITA, the above exemptions are not available.

Further, when a Free Trade Zone (“FTZ”) or an Export Processing Zone (“EPZ”) is converted into an SEZ, the Units, which have already availed of the 10-year tax exemption in an FTZ or EPZ, cannot avail of the Section 10AA exemptions.

(b) Losses falling under the heads “Profits and Gains from Business or Profession” and “Income from Capital Gains” can be carried forward / set off as long as such loss is related to the business of the SEZ Units

(c) Capital Gains on transfer of assets in case of shifting of an industrial undertaking from an urban area to an SEZ shall be exempt, provided that 1 year before, or 3 years after the transfer ? machinery / plant was purchased for the business of the industrial undertaking in the SEZ, Special Economic Zones: Growth, Development and Future Research Report

1. Building or land was acquired or building was constructed in the SEZ, the original asset was shifted and the establishment was transferred to the SEZ and
2. The assessee incurred such other expenses as are notified by the Central Government

(d) Interest income received by a non-resident or a person who is not ordinarily resident in India, on a deposit made in an OBU situated in an SEZ, shall be exempt from total income.

(e) No tax deduction shall be made by the OBU from interest paid:

1. on deposits made on or after April 1, 2005 by a non-resident or a person not ordinarily resident in India; or
2. on borrowings on or after April 1, 2005 from a non-resident or a person not ordinarily resident in India

(f) The gross total income of an assessee having an OBU or an assessee being a Unit of an IFSC shall be deductible to the extent of 100% for 5 consecutive years from the year of grant of permission under the
Banking Regulation Act / SEBI / other relevant law and 50% for the next 5 years12. It further defines the exempted “income”, which is:

1. Income from an OBU in an SEZ
2. Income from business referred to in the Banking Regulation Act, 1949, or any other Unit which develops, develops and operates, or develops, operates and maintains an SEZ ? Income from an approved unit of an IFSC

(g) Exemption from Securities Transaction Tax available to taxable securities transaction entered into by a non-resident through the IFSC Special Economic Zones: Growth, Development and Future Research Report

Other Benefits: Customs and Excise
Exemption from Customs Duty: SEZ Units may import or procure from the domestic sources, duty free, all their requirements of capital goods, raw materials, consumables, spares, packing materials, office equipment, DG sets etc. for implementation of their projects in the SEZ without requiring any licence or specific approval

1. Goods imported/procured locally which are duty-free could or should be utilized within the approval period of 5 years
2. Domestic sales by SEZ Units will be exempt from Special Additional Duty
3. Domestic sale of finished products, by-products is permitted on payment of applicable Customs duty
4. Domestic sale of rejects, waste and scrap is permitted on payment of applicable customs duty on the transaction value
5. Exemption from applicable excise duty on goods brought in from the DTA to an SEZ

Other Benefits: FDI
100% FDI under the automatic route is allowed in the manufacturing sector in SEZ Units, except for arms and ammunition, explosives, atomic substances, narcotics and hazardous chemicals, distillation and brewing of alcoholic drinks and cigarettes, cigars and manufactured tobacco substitutes

Exemption from the applicability of Press Note 2 (2005).

Other Benefits: Banking / Insurance / External Commercial Borrowings
Setting up OBUs has been allowed in SEZs. External Commercial Borrowings by SEZ Units up to US$ 500 million a year is allowed without any maturity restrictions
Freedom to bring in export proceeds without any time limit

Central Sales Tax
Exemption from Central sales tax on inter-state sale or purchase of goods

Other Central Enactments
Exemption from other Central enactments, which are specified in Schedule 1 of the SEZ Act

State Taxes
The respective State Governments may for the purpose of giving effect to the provisions of the SEZ Act, notify policies for Developers and SEZ Units and take suitable steps for the enactment of any law for granting exemption from state taxes, levies and duties to a Developer or an entrepreneur

Service Tax
Exemption from Service Tax to the Developer and the SEZ Units to carry on authorized operations in the SEZ. Service tax exemption granted only to Units in the DTA providing services to a Developer or to a Unit

Other Benefits: Stamp duty

No stamp duty is chargeable in respect of any instrument executed, by, or, on behalf of, or, in favour of, the Developer, or Unit or in connection with the carrying out of the purposes of the SEZ