IT sops for SEZ units under DTC likely

“The draft Direct Taxes Code (DTC) proposes investment linked deduction for developers of SEZs as against profit linked deduction under the Income Tax Act, 1961, and does not envisage any specific tax benefit for the units located in SEZs against the profit linked deduction currently available under the Income Tax Act,” Minister of State for Finance S S Palanimanickam said in the Rajya Sabha.

In a written reply, he said the government has received representation from the business community for similar deductions for SEZ units in DTC as are currently available under the Income Tax Act.

“These representations along with others on the different provisions of the draft DTC will be considered by the government before finalising the DTC,” he said.

The SEZ Act of 2005 provides for a slew of direct and indirect tax exemptions for units and developers of SEZs. The direct tax exemptions are implemented through various provisions in the existing Income Tax Act.

The draft DTC does not mention anything about units inside SEZs, but has a separate chapter on proposed guidelines that specify how developers of the tax-free industrial enclaves will be treated in the new tax regime. DTC is aimed at replacing the Income Tax Act, 1961.

A draft DTC has already been put in the public domain. The Government is expected to bring another discussion paper on DTC for public comments, after which a bill is likely to be tabled in Parliament.