Zonal Incentives

Zonal Incentives – Zonal incentives are tax benefits and financial concessions provided by the government to promote industrial growth and investment in specific geographical zones such as Special Economic Zones (SEZs), Software Technology Parks of India (STPIs), and Export Oriented Units (EOUs). These incentives aim to encourage regional development, boost exports, and create employment opportunities. Under the Income Tax Act, units set up in such zones can claim deductions or exemptions on profits derived from eligible activities: Section 10AA – Provides 100% deduction of profits for the first 5 years (and partial deduction thereafter) to units in SEZs. STPI units – Earlier enjoyed tax benefits under Section 10A/10B for export of software or IT services. Additionally, state governments may offer subsidies, tax rebates, or reduced stamp duty to attract industries to underdeveloped regions. Example: A software company operating in an SEZ earns ₹10 lakh profit from exports and claims 100% deduction under Section 10AA, thereby reducing its taxable income to zero for that year.