• Manasa M

Section 10A- Special Provision in Respect of Newly Established Undertakings in Free Trade Zone, Etc.

Updated: Oct 7

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The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.


The benefits in respect of newly established Industrial Undertaking in Free Trade Zone, Electronics Hardware Technology Park Scheme, Special Economic Zone or Software Technology Parks are Available to all Assessees on Export of Certain Articles or things or software Subject to the following Conditions: –

  • Should not be formed by breaking or reconstructing the unit which is already in the existence.


  • Should not be formed by transferring machinery or plant previously used. In certain conditions as specified in the Act, second-hand machinery is allowed.


  • Sale proceeds should be brought in convertible forex within 6 months from the end of payroll accounting.


  • Report in Form No.56F


  • Filing of return within due date under Section 139(1)


  • Tax Holiday: – For units which have begun prior to Accounting Year 2003-04,100% profit from the export of such article, thing, software for 10 consecutive Accounting Year. From the Accounting Year relevant to payroll accounting in which it began to manufacture subject to some conditions and restrictions mentioned in the Act. But for Accounting Year 2003-04 it is 90%. For units that have begun on or after Accounting Year 2003-04 the deduction is 100% for the first 5 years and 50% for the next 2 years and next 3 years 50% subject to the creation of “Special Economic Zone Reinvestment Allowance Reserve Account” and fulfillment of conditions relating thereto failing which the unutilized or wrongly utilized Reserve would be deemed income as per the provisions of the Act and the Rules.


  • No deduction for A.Y.2012 – 13 or thereafter


  • The computation of profits is as per the following formula: -

=Profit from the business of the under-taking × Export Turnover ÷ Total Turnover of Undertaking


  • No deduction shall be allowed under Section 80HH or Section 80HHA or Section 80-I or Section 80-IA or Section 80-IB in relation to the profits and gains of the undertaking


  • No loss referred to in sub-section (1) of Section 72 or sub­section (1) or sub-section (3) of Section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years [ending before the 1st day of April 2001].


  • In computing the depreciation allowance under Section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year.


  • The market value of goods to be transferred to be as per market rate on the date of transfer and as per arms-length price as per the provisions of sub-section (8) and sub-section (10) of Section 80-IA.


  • The provisions of this section do not apply to any undertaking, being a Unit referred to in clause (zc) of section 2 of the Special Economic Zones Act, 2005, which has begun or begins to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after AY 2006-07 in any Special Economic Zone.


  • Provisions related to amalgamation and demerger: - The benefit under this section is not available to the amalgamating or the demerged company for the previous year in which the amalgamation or the demerger takes place, and it is available to the amalgamated or the resulting company as it would have been available to the amalgamating or the demerged company if the amalgamation or demerger had not taken place.