India has always bet big on exports. They fuel jobs, attract foreign money, and keep the rupee stronger. To make that happen, the government introduced smart tax breaks—one of the strongest being Section 10B of the Income Tax Act.
This one’s a gem: it gives a tax holiday to 100 % Export Oriented Units (EOUs) and STP / EHTP units.
In plain English, if your company brings foreign income into India through exports, you get to keep more of it—legally tax-free for a while.
What Exactly Is Section 10B?
Section 10B of the Income Tax Act (1961) gives tax exemption on export profits of certain manufacturing or software-development undertakings.
If your unit is registered as a 100 % EOU under an export-promotion scheme, you could enjoy zero tax on export profits for a good stretch of years.
It’s a big incentive—meant to help companies expand abroad, invest in global-grade infrastructure, & strengthen India’s foreign-exchange reserves.
Who Can Claim the Benefit
You can fall under Section 10B if you’re one of the following:
- A 100 % EOU approved by the Development Commissioner
- A unit inside a Software Technology Park (STP) or Electronic Hardware Technology Park (EHTP)
- A business that manufactures, produces, or develops software purely for export
But note this: if your unit is just a split-off from an older business or runs on second-hand machinery, it’s not eligible.
Also Read: Exemption on Disaster Compensation
How Long Does the Tax Break Last?
Once you qualify, you get a 10-year tax holiday starting from the first year of production.
After that decade ends, your profits are taxed normally.
Ten years might sound long, but for exporters trying to build scale, it’s a huge head-start—plenty of time to grow before tax kicks in.
Conditions You Must Meet
To enjoy the Section 10B exemption, make sure you tick these boxes:
- Be 100 % export-oriented.
- Don’t form the unit by re-structuring an old business.
- Maintain proper audited books.
- File the audit report (Form 10B) with your return."
That audit report isn’t just paperwork—it’s your golden proof that the claim is legit.
So… What Is Form 10B Really?
Think of Form 10B as the government’s trust badge.
It’s an audit report under Section 12A (b), certified by a Chartered Accountant.
This form verifies your accounts, certifies your export income, & confirms that every rule under Section 10B has been followed.
In short, it’s your evidence file showing that the tax break is deserved—not borrowed.
When Do You Need to File Form 10B?
You’ll need it if:
- You claim exemption under Section 10, 11, 12 or 10B.
- Or, if your trust or institution has gross receipts above ₹ 5 crore in the previous year.
The form must be e-filed before the due date—generally October 31 for audited entities.
Miss that deadline, and your exemption could vanish in a click.
Also Read: Tax-Free Allowances for Work-Related Expenses
A Quick Example
Picture TechWave Solutions Pvt. Ltd., a 100 % EOU sitting inside an STP.
They earn ₹ 3 crore from exporting software.
Because they meet every Section 10B condition and file Form 10B, that full ₹ 3 crore is tax-exempt.
End result? Zero taxable income & more money to reinvest. Nice.
After the Holiday Ends
Once your ten years are up, the profits are taxed like regular business income.
Still, you can grab other deductions—R & D, depreciation, even export-related write-offs.
10A vs 10B vs 10BA – What’s the Difference?
|
Particulars |
Section 10A |
Section 10B |
Section 10BA |
|
Eligibility |
FTZ / SEZ units |
100 % EOU / STP / EHTP |
Handmade export goods (like wood crafts) |
|
Nature of Benefit |
Deduction from income |
Full exemption from income |
Deduction for specific handicrafts / handlooms |
|
Audit Form |
56F |
10B |
10BA |
So yes—10B is the broad, go-to exemption for most export-driven units.
How It Connects to Transfer Pricing (Section 92C)
If your EOU trades with related foreign entities, you’ve got to prove the prices are fair.
That’s Section 92C, the arm’s-length rule.
If the numbers look suspicious, tax officers can tweak them.
Together, 10B & 92C keep things balanced: one rewards you, the other keeps you honest.
Also Read: Tax Deductions for SEZ Units
Compliance Checklist
Here’s your quick Section 10B survival kit:
- Maintain neat, complete books of accounts.
- Get Form 10B signed by a CA.
- Clearly show export turnover vs domestic.
- Follow Section 92C if you deal with related parties.
Slip on any of these, and the exemption might vanish.
Why Form 10B Matters More Than You Think
Form 10B isn’t a bureaucratic ritual—it’s a legal shield.
It proves your statements are real & verified.
For trusts, it shows their income above ₹ 5 crore is used properly.
For EOUs, it confirms export profits match Section 10B rules.
Without it, your claim can crumble during assessment.
Common Blunders to Avoid
- Late filing of Form 10B.
- Missing Development Commissioner approval.
- Mixing domestic and export data.
- Ignoring transfer-pricing rules.
Each of these can wreck your tax break in seconds.
Court Takeaways
Indian courts generally support a liberal view of Section 10B—after all, it promotes exports.
But they’ve also said compliance is non-negotiable.
Even a small delay in Form 10B submission has led to claims being tossed out.
Also Read: Tax-Free Benefits from Provident Funds and Sukanya Samriddhi Account
The Big Benefits
- Encourages foreign-exchange inflow
- Fuels investment in IT & manufacturing"
- Gives a 10-year tax-free runway
- One simple audit form for all – Form 10B
- Promotes transparency via transfer-pricing checks
Latest Updates
The CBDT has occasionally extended Form 10B deadlines because of e-filing issues or pandemic delays.
They’re also working on digital verification, which will make approvals much faster and smoother.
Key Takeaways
- Section 10B = Tax-free profits for 100 % EOUs.
- Benefit lasts ten years.
- Form 10B filing is mandatory.
- Charitable trusts above ₹ 5 crore must also file it.
- Related-party exports must follow Section 92C norms.
Wrapping It Up
Section 10B is still one of India’s best tax-saving tools for exporters. It gives breathing room for businesses to expand globally while Form 10B ensures accountability. By tying it with Section 92C, the government keeps the relief real & the process fair.
So if you’re running an export unit or a large trust, remember—Form 10B can make or break your claim.
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