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SPECIAL ECONOMIC ZONES

Units set up in SEZs
A unit which sets up its operations in SEZ is entitled to claim Income-tax holiday for a period of 15 years commencing from the year in which such unit begins to manufacture or produce articles or things or provide services. The benefits are available against export profits, as under:

  • Deduction of 100 percent for the first five years
  • Deduction of 50 percent for the next five years
  • Deduction of 50 percent for the next five years (subject to conditions for creation of specified reserves).

SEZ developer

A 100 percent tax holiday (on profits and gains derived from any business of developing an SEZ) for any 10 consecutive years out of 15 years has been extended to undertakings involved in developing SEZ’s notified on or after 1 April 2005 under the SEZ Act, 2005.

Offshore Banking Units (OBU) and International Financial Services
Center units (IFSC) set up in SEZs
OBUs and IFSCs located in SEZs are entitled to a tax holiday of 100 percent of income for the first five years and 50 percent for next five consecutive years.

EXPORT ORIENTED UNITS (EOU)
Undertakings set-up in Export Processing Zones (EPZ)/Free Trade Zones (FTZ) or Electronic Hardware Technology Park (EHTP) or Software Technology Park (STP) or 100 percent EOUs, are eligible for a deduction of 100 percent on the profits derived from exports for 10 consecutive years beginning from the year in which such undertaking begins manufacturing or commences its business activities. Such a deduction would be available only up to financial
year 2010-11.

FOOD PROCESSING
A 100 percent tax holiday to undertakings from the business of processing, preservation, and packaging of fruits or vegetables or meat and meat products or poultry or marine or dairy products or from the integrated business of handling, storage, and the transportation of food grains for the first five consecutive years and thereafter, 30 percent (25 percent for non-corporate entities) for the next five consecutive years.

BUSINESS OF COLLECTING AND PROCESSING BIODEGRADABLE WASTE
A 100 percent tax holiday to undertakings from the business of collecting and processing or treating of bio-degradable waste for generating power or producing bio-fertilisers, bio pesticides or other biological agents or for producing bio-gas or making pellets or briquettes for fuel or organic manure, for the first five consecutive years.

COMMERCIAL PRODUCTION OR REFINING OF MINERAL OIL
A 100 percent tax holiday for the first seven consecutive years to undertakings (excluding undertakings located in the North eastern region) engaged in refining of mineral oil or engaged in commercial production of natural gas in blocks licensed under the VIII Round of bidding for award of exploration contracts under the New Exploration Licencing Policy announced by the Government of India vide Resolution No. O-19018/22/95-ONG.DO.VL, dated 10th
February 1999 or engaged in commercial production of natural gas in blocks licensed under the IV Round of bidding for award of exploration contracts for Coal Bed Methane blocks.

IN-HOUSE RESEARCH AND DEVELOPMENT
A weighted deduction at the rate of 200 percent of the scientific research expenditure incurred (excluding expenditure on cost of land or building) on an in-house research and development facility engaged in the business of manufacture or production of any article or thing other than the prohibited articles or things listed in the
Eleventh Schedule. The weighted deduction is to be available from 1 April 2010.

CAPITAL EXPENDITURE INCURRED IN SPECIFIED INDUSTRIES
A deduction in respect of entire capital expenditure (excluding expenditure on cost of land or goodwill or financial instrument) is allowed to the taxpayer engaged in following business on or after 1 April 2010:

  • Setting up and operating cold chain facilities for specified products
  • Warehousing facilities for storage of agricultural produce
  • Laying and operating cross-country natural gas or crude or petroleum oil pipeline network for distribution including storage facilities
  • Building and operating a new hospital with at least 100 patient beds
  • Developing and building a housing project under a scheme for slum redevelopment or rehabilitation framed by the Central Government or a State Government which is notified by the CBDT
  • Building and operating a new hotel of two star or above category anywhere in India.

Deduction to the expenditure incurred prior to commencement of operation of the above specified business will be allowed, if the expenditure was capitalised in the books of the taxpayer on the date of commencement of operation. The deduction will be allowed to the taxpayer in the year of commencement of operation.

INDUSTRIAL PARKS, MODEL TOWNS AND GROWTH CENTERS

For developers of industrial parks
A 100 percent tax holiday is available to developers of industrial parks for any 10 consecutive assessment years out of 15 years beginning from the year in which the undertaking or the enterprise develops, develops and operates or maintains and operates an industrial park, provided the date of commencement (i.e. the date of obtaining the completion certificate or occupation certificate) of the industrial park is not later than 31 March 2011.

Tax holiday in respect of infrastructure projects
Undertakings engaged in a prescribed infrastructure projects are
eligible for a consecutive 10 year tax holiday as set out below:

  • A 10 year tax holiday in a block of 20 years has been extended to undertakings engaged in developing/operating and maintaining/developing, operating and maintaining any infrastructure facility such as roads, bridges, rail systems, highway projects including housing or other activities being an integral part of the project, water supply projects, water treatment systems, irrigation projects, sanitation and sewerage systems or solid waste management system.
  • A 10 year tax holiday in a block of 15 years has also been extended to undertakings involved in the developing/operating and maintaining/developing, operating and maintaining, ports, airports, inland waterways, inland ports or navigational channels in the sea.

Tax holiday in respect of power projects
Undertakings engaged in prescribed power projects are eligible for a consecutive 10 year tax holiday as set out below:

  • A tax holiday of 10 years in a block of 15 years has also been extended to the undertakings set up before 31 March 2011 with respect to the following:
    – generation/generation and distribution of power, laying the network of new lines for transmission or distribution, undertaking a substantial renovation (more than 50 percent) and modernisation of the existing network of transmission or distribution lines.

Tax holiday in respect of hospitals/hotels/convention centres’

  • A 100 percent tax holiday for the first five consecutive years to an undertaking deriving profits from the business of operating and maintaining a hospital located anywhere in India (subject to exclusions), provided the hospital is constructed and has started or starts functioning at anytime before 31 March 2013.
  • A 100 percent tax holiday for the first five consecutive years to an undertaking deriving profits from the business of a hotel or from the business of a building, owning and operating a convention centre, in specified areas, if such a hotel/convention centre is constructed and has started or starts functioning before 31 July 2010.
  • A 100 percent tax holiday for the first five consecutive years to an undertaking deriving profit from the business of a hotel located in the specified district having a World Heritage Site, if such a hotel is constructed and has started or starts functioning before 31 March, 2013.
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