The Direct Taxes Code Bill has proposed to retain the current tax system of exemptions for special economic zones notified till 2012 but imposed a 20% minimum alternate tax. As per the Bill, any zone notified before 31 March 2012 and any unit that commences commercial operations by 31 March 2014 will enjoy the profit-linked tax exemption even as the Bill marks a shift in the criterion of corporate tax holidays.

The Bill has suggested a phased withdrawal of the current regime of tax exemptions that are linked to profits, and replacing it with tax sops linked to investments. The finance ministry proposes to implement the DTC by April 1 2012.

SEZ profits earned are 100% tax exempted for the first five years, 50% exemption for the next five years and another 50% exemption on re-invested profits in the following five years. SEZ developers, on the other hand, get 100% tax exemption on profits for 10 years, which they can choose in the block of the first 15 years.