Section 10A — Section 10A — Free Trade Zone (Historic)…

STATUTORY ARCHITECTURE — 18-ROW MAP

Statutory text — Income-tax Act, 1961

Special provision in respect of newly established undertakings in free trade zone, etc.

10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an

undertaking from the export of articles or things or computer software for a period of ten consecutive

assessment years beginning with the assessment year relevant to the previous year in which the undertaking

begins to manufacture or produce such articles or things or computer software, as the case may be, shall be

allowed from the total income of the assessee :

Provided that where in computing the total income of the undertaking for any assessment year, its profits

and gains had not been included by application of the provisions of this section as it stood immediately

before its substitution by the Finance Act, 2000, the undertaking shall be entitled to deduction referred to in

this sub-section only for the unexpired period of the aforesaid ten consecutive assessment years :

Provided further that where an undertaking initially located in any free trade zone or export processing

zone is subsequently located in a special economic zone by reason of conversion of such free trade zone or

export processing zone into a special economic zone, the period of ten consecutive assessment years

referred to in this sub-section shall be reckoned from the assessment year relevant to the previous year in

which the undertaking began to manufacture or produce such articles or things or computer software in such

free trade zone or export processing zone :

Provided also that for the assessment year beginning on the 1st day of April, 2003, the deduction under this

sub-section shall be ninety per cent of the profits and gains derived by an undertaking from the export of

such articles or things or computer software :

Provided also that no deduction under this section shall be allowed to any undertaking for the assessment

year beginning on the 1st day of April, 2012 and subsequent years.

(1A) Notwithstanding anything contained in sub-section (1), the deduction, in computing the total income of

an undertaking, which begins to manufacture or produce articles or things or computer software during the

previous year relevant to any assessment year commencing on or after the 1st day of April, 2003, in any

special economic zone, shall be,—

(i) hundred per cent of profits and gains derived from the export of such articles or things or computer

software for a period of five consecutive assessment years beginning with the assessment year

relevant to the previous year in which the undertaking begins to manufacture or produce such

articles or things or computer software, as the case may be, and thereafter, fifty per cent of such

profits and gains for further two consecutive assessment years, and thereafter;

(ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per

cent of the profit as is debited to the profit and loss account of the previous year in respect of

which the deduction is to be allowed and credited to a reserve account (to be called the "Special

Economic Zone Re-investment Allowance Reserve Account") to be created and utilised for the

purposes of the business of the assessee in the manner laid down in sub-section (1B) :

Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return

of his income on or before the due date specified under sub-section (1) of section 139.

(1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are

fulfilled, namely:—

(a) the amount credited to the Special Economic Zone Re-investment Allowance Reserve Account is

to be utilised—

(i) for the purposes of acquiring new machinery or plant which is first put to use before the

expiry of a period of three years next following the previous year in which the reserve was

created; and

(ii) until the acquisition of new machinery or plant as aforesaid, for the purposes of the

business of the undertaking other than for distribution by way of dividends or profits or for

remittance outside India as profits or for the creation of any asset outside India;

(b) the particulars, as may be prescribed in this behalf, have been furnished by the assessee in respect

of new machinery or plant along with the return of income for the assessment year relevant to the

previous year in which such plant or machinery was first put to use.

(1C) Where any amount credited to the Special Economic Zone Re-investment Allowance Reserve Account

under clause (ii) of sub-section (1A),—

(a) has been utilised for any purpose other than those referred to in sub-section (1B), the amount so

utilised; or

(b) has not been utilised before the expiry of the period specified in sub-clause (i) of clause (a) of

sub-section (1B), the amount not so utilised,

shall be deemed to be the profits,—

(i) in a case referred to in clause (a), in the year in which the amount was so utilised; or

(ii) in a case referred to in clause (b), in the year immediately following the period of three years

specified in sub-clause (i) of clause (a) of sub-section (1B),

and shall be charged to tax accordingly.

(2) This section applies to any undertaking which fulfils all the following conditions, namely :—

(i) it has begun or begins to manufacture or produce articles or things or computer software during the

previous year relevant to the assessment year—

(a) commencing on or after the 1st day of April, 1981, in any free trade zone; or

(b) commencing on or after the 1st day of April, 1994, in any electronic hardware technology

park, or, as the case may be, software technology park;

(c) commencing on or after the 1st day of April, 2001 in any special economic zone;

(ii) it is not formed by the splitting up, or the reconstruction, of a business already in existence :

Provided that this condition shall not apply in respect of any undertaking which is formed as a

result of the re-establishment, reconstruction or revival by the assessee of the business of any such

undertakings as is referred to in section 33B, in the circumstances and within the period specified

in that section;

(iii) it is not formed by the transfer to a new business of machinery or plant previously used for any

purpose.

Explanation.—The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall

apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that

sub-section.

(3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software

exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange,

within a period of six months from the end of the previous year or, within such further period as the

competent authority may allow in this behalf.

Explanation 1.—For the purposes of this sub-section, the expression "competent authority" means the

Reserve Bank of India or such other authority as is authorised under any law for the time being in force for

regulating payments and dealings in foreign exchange.

Explanation 2.—The sale proceeds referred to in this sub-section shall be deemed to have been received in

India where such sale proceeds are credited to a separate account maintained for the purpose by the

assessee with any bank outside India with the approval of the Reserve Bank of India.

(4) For the purposes of sub-sections (1) and (1A), the profits derived from export of articles or things or

computer software shall be the amount which bears to the profits of the business of the undertaking, the

same proportion as the export turnover in respect of such articles or things or computer software bears to the

total turnover of the business carried on by the undertaking.

(5) The deduction under this section shall not be admissible for any assessment year beginning on or after

the 1st day of April, 2001, unless the assessee furnishes in the prescribed form, the report of an accountant,

as defined in the Explanation below sub-section (2) of section 288 before the specified date referred to in

section 44AB, certifying that the deduction has been correctly claimed in accordance with the provisions of

this section.

(6) Notwithstanding anything contained in any other provision of this Act, in computing the total income of

the assessee of the previous year relevant to the assessment year immediately succeeding the last of the

relevant assessment years, or of any previous year, relevant to any subsequent assessment year,—

(i) section 32, section 32A, section 33, section 35 and clause (ix) of sub-section (1) of section 36 shall

apply as if every allowance or deduction referred to therein and relating to or allowable for any of

the relevant assessment years ending before the 1st day of April, 2001, in relation to any building,

machinery, plant or furniture used for the purposes of the business of the undertaking in the

previous year relevant to such assessment year or any expenditure incurred for the purposes of

such business in such previous year had been given full effect to for that assessment year itself and

accordingly sub-section (2) of section 32, clause (ii) of sub-section (3) of section 32A, clause (ii) of

sub-section (2) of section 33, sub-section (4) of section 35 or the second proviso to clause (ix) of

sub-section (1) of section 36, as the case may be, shall not apply in relation to any such allowance

or deduction;

(ii) no loss referred to in sub-section (1) of section 72 or sub-section (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;

(iii) 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; and

(iv) 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.

(7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in

relation to the undertaking referred to in this section as they apply for the purposes of the undertaking

referred to in section 80-IA.

(7A) Where any undertaking of an Indian company which is entitled to the deduction under this section is

transferred, before the expiry of the period specified in this section, to another Indian company in a scheme

of amalgamation or demerger,—

(a) no deduction shall be admissible under this section to the amalgamating or the demerged company

for the previous year in which the amalgamation or the demerger takes place; and

(b) the provisions of this section shall, as far as may be, apply to the amalgamated or the resulting

company as they would have applied to the amalgamating or the demerged company if the

amalgamation or demerger had not taken place.

(7B) The provisions of this section shall 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 the 1st day of April, 2006 in any Special Economic Zone.

(8) Notwithstanding anything contained in the foregoing provisions of this section, where the assessee,

before the due date for furnishing the return of income under sub-section (1) of section 139, furnishes to the

Assessing Officer a declaration in writing that the provisions of this section may not be made applicable to

him, the provisions of this section shall not apply to him for any of the relevant assessment years.

(9) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

(9A) [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 1.— [Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]

Explanation 2.—For the purposes of this section,—

(i) "computer software" means—

(a) any computer programme recorded on any disc, tape, perforated media or other

information storage device; or

(b) any customized electronic data or any product or service of similar nature, as may be

notified by the Board,

which is transmitted or exported from India to any place outside India by any means;

(ii) "convertible foreign exchange" means foreign exchange which is for the time being treated by the

Reserve Bank of India as convertible foreign exchange for the purposes of the Foreign Exchange

Management Act, 1999 (42 of 1999), and any rules made thereunder or any other corresponding

law for the time being in force;

(iii) "electronic hardware technology park" means any park set up in accordance with the Electronic

Hardware Technology Park (EHTP) Scheme notified by the Government of India in the Ministry of

Commerce and Industry;

(iv) "export turnover" means the consideration in respect of export by the undertaking of articles or

things or computer software received in, or brought into, India by the assessee in convertible

foreign exchange in accordance with sub-section (3), but does not include freight,

telecommunication charges or insurance attributable to the delivery of the articles or things or

computer software outside India or expenses, if any, incurred in foreign exchange in providing the

technical services outside India;

(v) "free trade zone" means the Kandla Free Trade Zone and the Santacruz Electronics Export

Processing Zone and includes any other free trade zone which the Central Government may, by

notification in the Official Gazette, specify for the purposes of this section;

(vi) "relevant assessment year" means any assessment year falling within a period of ten consecutive

assessment years referred to in this section;

(vii) "software technology park" means any park set up in accordance with the Software Technology

Park Scheme notified by the Government of India in the Ministry of Commerce and Industry;

(viii) "special economic zone" means a zone which the Central Government may, by notification in the

Official Gazette, specify as a special economic zone for the purposes of this section.

Explanation 3.—For the removal of doubts, it is hereby declared that the profits and gains derived from on

site development of computer software (including services for development of software) outside India shall

be deemed to be the profits and gains derived from the export of computer software outside India.

Explanation 4.—For the purposes of this section, "manufacture or produce" shall include the cutting and

polishing of precious and semi-precious stones.

Function in the statutory architecture

Section 10A allowed a deduction of the profits and gains derived by an undertaking from the export of articles or things or computer software, for ten consecutive assessment years beginning with the year in which it began to manufacture or produce. It applied to undertakings that began production in a free trade zone (from AY 1981-82), an electronic hardware or software technology park (from AY 1994-95) or a special economic zone (from AY 2001-02). For AY 2003-04 the deduction was ninety per cent of the export profits.

The undertaking could not be formed by splitting up or reconstructing an existing business, or by transferring used machinery or plant. Sale proceeds had to be brought into India in convertible foreign exchange within six months from the end of the previous year, or a further allowed period. Export profits followed the ratio of export turnover to total turnover, and an accountant’s report was required.

Operative consequences

No loss of the undertaking relating to relevant assessment years ending before 1-4-2001 could be carried forward or set off (sub-section (6)(ii)).
No deduction under ss. 80HH, 80HHA, 80-I, 80-IA or 80-IB was allowed on the same profits (sub-section (6)(iii)).
An assessee could opt out by a written declaration filed before the due date under s. 139(1) (sub-section (8)).
Amounts credited to the reserve and misused, or not used for new machinery or plant within three years, were deemed profits (sub-section (1C)).

Status

The section is not operative for AY 2026-27. The last proviso to sub-section (1) states that no deduction “shall be allowed to any undertaking for the assessment year beginning on the 1st day of April, 2012 and subsequent years”. Sub-sections (9) and (9A) read “[Omitted by the Finance Act, 2003, w.e.f. 1-4-2004.]”. The Finance Act, 2026 does not amend this section.

The 1961 Act governs AY 2026-27 and earlier assessment years; the Income-tax Act, 2025 governs tax year 2026-27 onwards. For this subject there is no provision in the Income-tax Act, 2025.

Case law on Section 10A

ITAT, High Court and Supreme Court judgments applying this section, on BharatTax.net, our income tax case law search.

Section 10A case laws

← All sections (940)Act 1961 hub

Income-tax Act, 1961	Income-tax Act, 2025
s. 10A(1), (1A) — deduction of export profits of undertakings in free trade zones, electronic hardware or software technology parks and special economic zones	No corresponding provision in the Income-tax Act, 2025
s. 10A(1B), (1C) — Special Economic Zone Re-investment Allowance Reserve Account and deemed profits on misuse	No corresponding provision in the Income-tax Act, 2025; amounts that fall to be taxed later on breach of a condition are dealt with by s. 536(2)(h)
s. 10A(7B) — no deduction for SEZ Units beginning manufacture from AY 2006-07	No corresponding provision in the Income-tax Act, 2025; SEZ Units are covered by s. 10AA and its 2025 counterpart s. 144