CBDT Notification No. 91/2023 Dt. 19 October 2023
The Central Board of Direct Taxes (CBDT) vide its Notification No.91/2023 Dated.19th October 2023 has notified about making some further rules to amend the Income Tax Rules 1962. These Rules may be called the Income Tax (Twenty Sixth Amendment) Rules 2023 and they shall come into force from 29th July 2021 (retrospectively).
Rule 16D is a new rule inserted vide this Notification, which prescribes the rules and form (Form-56F) for furnishing the report of an Accountant which is required to be furnished by an exporter in Special Economic Zone (SEZ) for claiming deduction under section 10AA of the Income Tax Act. For more details about the provisions under section 10AA, readers may follow the link given at the end of this article.
Let us now delve into the specific amendments relating to insertion of new rule 16D and Form No 56F brought through this Notification No. 91/2023.
Insertion of the New Rule 16D
In the Income-tax Rules, 1962, after rule 16CC, the following rule shall be inserted, namely:
“Rule 16D (Form of report for claiming deduction under section 10AA)—The report of an accountant which is required to be furnished by the assessee, under sub-section (8) of section 10AA read with sub-section (5) of section 10A shall be in Form No. 56F.”
Omissions from Rule 130
In rule 130 (rule/list of omitted rules/forms/savings):
(a) in sub-rule (1), the figures and letter “16D”, shall be omitted;
(b) in sub-rule (2), the figures and letter “56F”, shall be omitted.
Insertion of New Form 56F
In the Appendix II of the Income Tax Rules 1962, a new form 56F shall be inserted after Form 56E (as it stood prior to its omission vide the 21st amendment in 2021). Form-56F will be used for furnishing the report of an Accountant which is required to be furnished by an exporter in Special Economic Zone (SEZ) for claiming deduction under section 10AA of the Income Tax Act. The Form 56F template is given under the Notification 91/2023. Readers can follow the link given below to access the notification along with this form 56F.
As the Notification is related to Section 10AA of the Income Tax Act, a note on section 10AA provisions is given below for the benefit of the readers.
Provisions under Section 10AA of the Income Tax Act 1961
Section 10AA of the Income Tax Act offers significant tax benefits to newly-established businesses operating in Special Economic Zones (SEZs). These benefits are designed to stimulate economic growth, boost exports, and attract foreign investment. Section 10AA was initially introduced in April 2000 under the Foreign Policy Act and was later fully formulated in 2006 under the SEZ Act, providing tax concessions to entities within SEZs.
Eligibility for Deduction Under Section 10AA
To qualify for the tax incentives provided by Section 10AA, businesses must meet specific criteria:
- They must be established in SEZs between April 1, 2005, and April 1, 2020.
- Compliance with certain conditions, including obtaining necessary approvals and filing prescribed returns, is essential.
- Units formed by transferring plant or machinery from a previous company are ineligible under Section 10AA.
- Entities that have already claimed deductions under Section 10A for ten consecutive years before the SEZ Act of 2005 are not eligible.
- If a business’s profits were calculated under sub-section (7B) of Section 10A, only gains for the unexpired portion of ten years are eligible under Section 10AA.
- The company must commence production on or before March 31, 2023.
Amount of Deduction Under Section 10AA
The amount of deduction available under Section 10AA is structured as follows:
(i) 100% of the profits from exports for the first five consecutive assessment years.
(ii) 50% of such profits for the five assessment years following the initial five-year period.
For the next five assessment years, not more than 50% of the profit is eligible for tax deduction. This deduction is recorded on the profit and loss statement and credited to the ‘Special Economic Zone Re-Investment Reserve Account.’
Deductions can be claimed from the year before the one in which the company began manufacturing or providing services. These deductions cannot exceed the taxpayer’s total income and apply to the total income of the industrial undertaking.
Calculation for Deduction Under Section 10AA of the Income Tax Act
The deduction under Section 10AA is calculated using the following formula:
Profit from Export = (Profits of Business x Export Turnover of the Unit) / Total Turnover of the Business.
In summary, Section 10AA of the Income Tax Act provides a valuable tax framework to incentivize businesses within Special Economic Zones, with the aim of driving economic growth and promoting exports.
To access the CBDT Notification No.91/2023 CLICK HERE
To Access the provisions under section 10AA CLICK HERE
To Access the Rule 130 CLICK HERE
To Access the CBDT Notification 89/2023 CLICK HERE
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