Tax sops only to SEZs commencing activity before Mar 31, 2020

Government today said tax benefits will be available to only those SEZ units, which will commence commercial activity before March 31, 2020.

The move is aimed at prompting such units to expeditiously complete their projects and begin operations.

The proposal forms part of the overall exercise to reduce exemptions and move towards a lower corporate tax regime.

"The benefit of section 10AA to new SEZ units will be available to those units which commence activity before 31.3.2020," Finance Minister Arun Jaitley said in his Budget speech.

In the last year's Budget, the minister had mooted the proposal to reduce the rate of corporate tax from 30 per cent to 25 per cent over a period, accompanied by rationalisation and removal of various tax exemptions and incentives.

"A phasing out plan of removing these exemptions and tax incentives was placed in public domain and we have received a large number of constructive suggestions," he said.

He said the accelerated depreciation provided under Income Tax Act will be limited to maximum 40 per cent from April 1, 2017.

He also said the benefit of deductions for research would be limited to 150 per cent from April 1, 2017 and 100 per cent from April 1, 2020.

"The weighted deduction under section 35CCD for skill development will continue up to 1.4.2020," he added.

On the SEZ issue, the industry has demanded to retain the tax incentives being enjoyed by these zones as their removal would hurt exports and employment generation.
During April-September, exports from these zones stood at Rs 2.21 lakh crore as against Rs 4.63 lakh crore in 2014-15.

The SEZs enjoy 100 per cent income tax exemption on export income for the first five years, 50 per cent for the next five years thereafter and 50 per cent of the ploughed back export profit for another five years.

About 500 proposals for SEZs have been formally approved by the government, out of which over 200 are operational.