Doing Business in India - RSM Austria

2.4 Tax Relief
In order to encourage industrial growth and development, the Government of India
offers several tax incentives to industrial units and foreign exchange earners in the
country. These incentives reduce the tax incidence substantially and are subject to
fulfillment of specified conditions.
2.4.1 Tax Benefits
The Income Tax Act, 1961 provides for far reaching tax holidays and other tax
incentives for businesses. We have enumerated, in brief, the significant tax holidays
and incentives available to businesses along with the nature of deductions,
eligibility criteria, quantum of deduction and period for which the deductions are
available. The tax holidays and incentives are subject to fulfillment of specified
conditions and those are available to enterprises engaged in certain specified
activities. The below table has been updated to cover the amendments as per the
Finance Act 2010 ('The Act') which shall be effective from financial year 2010-11.
These are summarized below:
Section
10A /
10B
Details of Exemption / Deduction
For newly established undertakings in Free
Trade Zones or 100% Export Oriented
Undertakings.
For any eligible undertaking set up in a
Special Economic Zone ('SEZ') after 1 April
2002 but before 31 March 2005.
Exemption is available for profits from
export of certain articles or things or
computer software, manufactured or
produced by an eligible undertaking.
The term 'computer software' includes
notified 'information technology enabled
services'.
The benefit is available to units engaged in
cutting and polishing of precious and semiprecious
stones.
The export proceeds must be realized
within specified time.
No deduction under these sections will be
allowed unless the assessee files the
return of income within prescribed time
limit.
The unit availing these deductions will
be subject to MAT @19.93% [(tax rate
18% plus surcharge 7.5%) plus
education cess 3% thereon] (having
book profit exceeding Rs. 1,00,00,000)
or 18.54% (in other cases).
The tax holiday available under sections
10A/10B to units in STPI, EHTP, FTZ and
EOU will be available upto 31 March 2011.
The Act has not extended such tax
holidays beyond 31 March 2011.
Period
First 10 years upto
financial year
2010-11.
First 5 years
Next 2 years
Next 3 years*
Quantum
of Deduction
100%
100%
50%
50%
100
DOING BUSINESS IN INDIA