Schedule 10AA – Deduction under section 10AA AY 2026-27

Schedule 10AA – Deduction under section 10AA AY 2026-27

‘Schedule 10AA’ in the Income Tax Return (ITR) form captures information related to deductions claimed under Section 10AA of the Income Tax Act. This section provides a tax holiday for units established in Special Economic Zones (SEZs) that are engaged in manufacturing, producing goods, or providing services.

The schedule captures the details of each eligible undertaking, including the assessment year in which the unit commenced its operations, and the amount of deduction claimed for each unit based on the figures certified in Form 56F. It allows the taxpayer to declare the deduction for multiple undertakings separately and then shows the total deduction available under section 10AA by combining the amounts for all eligible undertakings.

Section 10AA of the Income-tax Act, 1961.

Section 10AA provides tax incentives for Units in Special Economic Zones (SEZs) that begin manufacturing or providing services between 1st April 2006 and 31st March 2021. Eligible Units can claim 100% deduction of export profits for the first five years, 50% for the next five years, and a further 50% for the next five years if the amount is credited to a Special Economic Zone Re-investment Reserve Account and used for acquiring new plant or machinery within three years. The reserve cannot be used for dividends, remittance abroad, or creation of assets outside India.

The deduction applies only if export proceeds are received in convertible foreign exchange, and Units must comply with filing requirements and reinvestment conditions. Misuse or non-utilisation of the reserve within the specified period will make the amount taxable. Losses of the Unit can be carried forward, and export profits are calculated proportionately to export turnover. Units that have already availed benefits under Section 10A for ten years are generally not eligible under 10AA.

This schedule applies to ITR-3, ITR-5 & ITR-6