Chapter VIII - Deductions to be Made in Computing Total Income
Section 144
Section 144: deduction for newly established SEZ units
Section 144 continues the deduction available to an "entrepreneur" (as defined under the Special Economic Zones Act, 2005) operating a unit in a Special Economic Zone that manufactures or produces articles or things, or provides services, for export - the deduction most people know as "10AA" under the repealed Income-tax Act, 1961. As with the other carry-forward sections in this Chapter, both the amount and the eligible years are fixed by reference to the old section.
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Need advice on Section 144?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
In respect of any tax year, where—
(a) in computing the total income of an assessee, being an entrepreneur as referred to in section 2(j) of the Special Economic Zones Act, 2005 (28 of 2005), who begins to manufacture or produce articles or things or provide any services, as referred to in section 10AA of the Income-tax Act, 1961 (43 of 1961); and
(b) such assessee is eligible to claim a deduction from the profits and gains derived from the export, of such articles or things or from services for such tax year under the provisions of the said section, if the said Act had not been repealed,
there shall be allowed, in computing the total income of the assessee, a deduction from the profits and gains derived from such business, subject to the conditions that—
(i) the amount of deduction is calculated as per the provisions of section 10AA of the Income-tax Act, 1961 (43 of 1961); and
(ii) the deduction under this Act shall be allowed only for such tax years, as would have been allowed under section 10AA of the Income-tax Act, 1961 (43 of 1961), as if the said Act had not been repealed.
Introduction
Section 144 preserves an eligible SEZ unit's export-profit deduction from Section 10AA of the 1961 Act. The amount and tax years must be those that would have remained available under Section 10AA had the earlier Act continued.
Key takeaways
Continuing SEZ-unit entitlement
An entrepreneur with export profits already eligible under Section 10AA of the 1961 Act may continue the qualifying deduction under the 2025 Act.
No fresh benefit period
The amount and available years remain those permitted by Section 10AA as if the 1961 Act had not been repealed.
What Section 144 does
Where an assessee, being an entrepreneur as referred to in section 2(j) of the Special Economic Zones Act, 2005, who begins to manufacture or produce articles or things or provide any services as referred to in section 10AA of the Income-tax Act, 1961, is eligible to claim a deduction from the profits and gains derived from the export of such articles, things or services under that section (as if the said Act had not been repealed), a deduction from those profits and gains is allowed in computing total income under the 2025 Act.
How the deduction is worked out
- The amount of deduction is calculated as per the provisions of section 10AA of the Income-tax Act, 1961.
- The deduction under the 2025 Act is allowed only for the tax years for which it would have been allowed under section 10AA of the Income-tax Act, 1961, as if that Act had not been repealed.
Unit and export records
Verify the entrepreneur's qualifying SEZ unit, its commencement history and export-derived profit separately from other operations before applying the old-law formula.
Step-by-step flow for applying Section 144
- 1
Does gross total income for the tax year include profits and gains derived from the export of articles or things, or from services, by an entrepreneur's unit referred to in section 10AA of the Income-tax Act, 1961?
Section 144(a) looks only at profits and gains from the kind of business referred to in section 10AA of the Income-tax Act, 1961, by an entrepreneur as referred to in section 2(j) of the Special Economic Zones Act, 2005.
- No: Section 144 does not apply.
- Yes: Go to the next step.
- 2
Would the assessee be eligible for the section 10AA deduction for this tax year, as if the 1961 Act had not been repealed?
Section 144(b) imports the old eligibility test. Section 144 itself sets no fresh conditions, so the historic approvals, commencement facts and claim history must support eligibility.
- Not eligible under the old section: No deduction under this section.
- Eligible: Go to the next step.
- 3
Is this tax year one for which section 10AA would still have allowed the deduction?
Condition (ii): the deduction is allowed only for the tax years that would have been allowed under section 10AA. Count the years already claimed; the 2025 Act does not restart or extend the period.
- Period already exhausted: No deduction for this or later tax years.
- Year still within the period: Go to the next step.
- 4
Compute the amount as per section 10AA and claim it
Condition (i): the amount is calculated as per the provisions of section 10AA of the 1961 Act, and is deducted from the profits and gains of that business in computing total income.
Practical checklist
Do
- Keep SEZ unit approval, export evidence and prior Section 10AA claim schedule.
- Compute the deduction and remaining years under Section 10AA of the 1961 Act.
Avoid
- Do not infer a new deduction term from the 2025 Act's commencement.
- Do not include domestic or unrelated profit as export-derived qualifying profit.
Illustrative example
Worked example: an SEZ unit with export and domestic sales
Hypothetical facts (illustration only, not a real taxpayer): An entrepreneur (as referred to in section 2(j) of the Special Economic Zones Act, 2005) runs a unit that began manufacturing as referred to in section 10AA of the 1961 Act and claimed that deduction in earlier years. In the current tax year the unit has both export sales and some domestic sales.
Export-derived profit
Only profits derived from export of the articles or things (or from services) are the starting point under clause (b); profit attributable to the domestic sales is not.
Eligibility and remaining years
The entrepreneur checks its approval, commencement history and prior section 10AA claims to confirm the year is one that section 10AA would still have allowed (condition (ii)).
Amount
The deduction is calculated as per section 10AA of the 1961 Act (condition (i)); Section 144 adds no new formula.
Outcome
- If the year is still within the old-law period, the deduction is claimed under Section 144 on the unit's export profits as computed under section 10AA.
- Once the section 10AA period is over, no deduction is available, whatever the unit's export performance.
Glossary
- SEZ unit
- A qualifying unit in a Special Economic Zone under the incorporated statutory scheme.
- Export-derived profit
- Profit from qualifying exports or services on which the deduction is calculated.
Frequently asked questions
Does Section 144 create a new SEZ unit deduction?
No. It continues the export-profit deduction an entrepreneur's SEZ unit was already entitled to under section 10AA of the Income-tax Act, 1961, for whatever remains of that section's original eligibility period, calculated the same way that section prescribed.
Who can claim this deduction?
An assessee who is an entrepreneur as defined in section 2(j) of the Special Economic Zones Act, 2005, operating a unit that manufactures or produces articles or things, or provides services, as referred to in section 10AA of the Income-tax Act, 1961, and who was eligible for the deduction under that section.
Need help applying this provision to your situation?
Talk to our tax team about SEZ unit tax benefitsLast updated 9 October 2026