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The deadline of March, 2014, under the proposed Direct Taxes Code (DTC) for making new special economic zone units operational if they are to get tax benefits is likely to speed up development of these SEZs by entrepreneurs, a report said.

“In order to meet the time lines proposed in the Direct Taxes Code, developers and investors are likely to fast track the development of SEZs to meet the unit operational deadline of March, 2014,” a report by industry chamber Assocham said.

The DTC Bill, which was tabled in Parliament in August, proposed that units in SEZs that commence commercial operations by March, 2014, shall be allowed profit-linked deductions permitted under the Income Tax Act, 1961.

It also proposed that SEZs notified on or before March 31, 2012, will get income tax benefits.

With SEZs attracting investments of over Rs 1.66 lakh crore, industry sources said the income tax benefit provided in the SEZ Act, 2005, is the major attraction for investors.

Assocham further said that demand for offices in the SEZs is expected to be low in the next 3-6 months, as occupiers are likely to rework their real estate strategies in the wake of the new time lines proposed in the DTC.

The report said that while non-extension of profit-based tax incentives to new SEZs is a definite “setback” to the overall SEZ scheme, it is a step forward towards rationalisation prior to introduction of a consistent tax policy.

“The real estate market in India is likely to adjust to the changing circumstances once DTC comes into force and then see a sustained demand momentum until 2014 from developers as well as occupiers,” the report said.

The government has given formal approval for setting up about 580 SEZs, of which 122 have become operational.

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