Feb. 10 – The government is expected to formally clarify that special economic zones (SEZs) will continue to maintain its specific tax benefits even after the implementation of the new direct taxes code.

India’s Commerce Department has been calling for the clarification on SEZ tax to assure investors that tax benefits will still be applicable even after the new tax code is announced. This is in light of a section of the proposed version of the new direct tax code that suggests canceling the current tax exemption on profits on investments made by SEZ developers while also failing to provide detailed instruction on the tax treatment for businesses based in the SEZs.

The department is working towards making SEZs excluded from the new direct tax code and instead continue to follow provisions provided in the SEZ Act.

According to the SEZ Act, business units are qualified for a full tax exemption on profits made for the first five years and a 50 percent tax exemption for the next five years. A 50 percent tax exemption will be given for re-invested profits in the following five years. Moreover, SEZ developers are given full tax exemption on profits for ten years.