CBDT Circular No. 2/2025 Extends Form 56F Filing Deadline for SEZ Unit Tax Exemption Claims

On 13 February 2025 the Central Board of Direct Taxes (CBDT) issued Circular No. 2/2025 (F.No. 300173/11/2025-ITA-I), giving Special Economic Zone (SEZ) units a six-month cushion to file Form No. 56F, the accountant's report that underpins their deduction claim under Section 10AA of the Income-tax Act, 1961. For Assessment Year 2024-25, the due date moved from the specified date under Section 44AB (30 September 2024) to 31 March 2025. If your unit claims the SEZ deduction and the certificate was still pending, this circular was the difference between keeping the claim and losing it.

This is a narrow but high-value relief. The Section 10AA deduction can shield 100% of export profits in a unit's early years, so a single missed certificate can convert a fully exempt profit into a fully taxable one. Below we set out exactly what the circular does, work through the arithmetic on a representative SEZ unit, flag the mistakes that surface in scrutiny, and answer the questions that come up most often.

What the Section Says

Section 10AA grants a deduction from total income to a newly established unit in a Special Economic Zone that exports articles, things or computer software. The deduction follows a tapering schedule: 100% of the profits derived from exports for the first five consecutive assessment years, 50% for the next five assessment years, and up to 50% for a further five years, the last tranche being conditional on crediting an amount to the SEZ Re-investment Reserve Account. The benefit is available only to units that began to manufacture or produce on or before 31 March 2020, the sunset date fixed by the legislature; no fresh unit set up after that date qualifies.

The deduction is not simply the unit's book profit. Section 10AA(7) prescribes a proportion: the profits of the business of the unit are multiplied by the ratio of the unit's export turnover to the total turnover of the business. A unit that exports every rupee of its output deducts the full eligible percentage; a unit with a domestic tail deducts proportionately less. Understanding that this is a formula-driven tax deduction, and not a blanket tax exemption, is the first step to filing Form 56F correctly.

The certificate requirement sits in Section 10AA(8), which imports the machinery of Section 10A(5). It requires the assessee to furnish, along with the return, a report of a chartered accountant in Form No. 56F certifying that the deduction has been correctly computed. Following the Finance Act 2020 amendments, that report must be furnished by the specified date referred to in Section 44AB, which the Act defines as the date one month prior to the due date for furnishing the return under Section 139(1). For AY 2024-25, with the audit-case return due on 31 October 2024, the specified date for Form 56F fell on 30 September 2024.

Circular No. 2/2025 is issued under Section 119(2)(b), the provision that lets the CBDT relax statutory timelines to avoid genuine hardship. The operative line is precise: the Board "extends the due date of filing of report of the accountant as required to be filed under sub-section (8) of section 10AA read with sub-section (5) of section 10A of the Act, for Assessment year 2024-25 from the specified date under section 44AB of the Act to 31.03.2025." Nothing else in the Section 10AA framework changed; only the Form 56F clock moved.

Worked Example

Consider Meridian Analytics Pvt Ltd, a software services company operating a single SEZ unit that commenced production in FY 2021-22 and is therefore in the 100% deduction phase for AY 2024-25 (its third year). Its figures for the previous year are a profit of the unit of Rs 2,00,00,000, an export turnover of Rs 9,00,00,000, and a total turnover of Rs 10,00,00,000, the Rs 1 crore gap being a domestic support contract.

Applying the Section 10AA(7) formula, the deduction equals the unit's profit multiplied by the export-turnover ratio, at the 100% rate for an early-phase unit. That works out to Rs 2,00,00,000 multiplied by 0.9, or Rs 1,80,00,000. The residual Rs 20,00,000 enters taxable income. Had the company let the Form 56F deadline of 30 September 2024 lapse without the Circular No. 2/2025 extension to 31 March 2025, the entire Rs 2,00,00,000 would have been exposed, because an unsupported Section 10AA claim invites disallowance.

The scale of what is at stake is clearest in tax terms. At the 22% concessional rate a domestic company can elect under Section 115BAA, the Rs 1,80,00,000 deduction shields roughly Rs 39,60,000 of tax before surcharge and the 4% health and education cess; with cess the effective shield is near Rs 41,18,000. Readers modelling their own numbers can run the residual through our income tax calculator, and companies managing withholding on domestic receipts can cross-check obligations with the TDS calculator. From the sixth assessment year, the same unit drops to the 50% rate, so on the identical facts the deduction would halve to Rs 90,00,000, a reminder that the relief is time-bound as well as certificate-bound.

Common Mistakes

The first and most common error is treating Form 56F as a document to be filed only with the return. Since the Finance Act 2020, the report must be furnished by the specified date under Section 44AB, which for AY 2024-25 was 30 September 2024, a full month ahead of the 31 October 2024 return. Taxpayers who timed the certificate to the return date were already late before Circular No. 2/2025 created breathing room to 31 March 2025.

The second mistake is misreading the circular's scope. The relief is confined to Form 56F for AY 2024-25 and to the Section 119(2)(b) hardship ground; it did not extend the Section 139(1) return due date, the Section 44AB tax-audit report, or any other compliance. A unit that read the 31 March 2025 date as a general reprieve and delayed its gross total income computation or its advance tax risked interest exposure that the circular never touched; such liabilities should be projected using the advance tax calculator.

The third error surfaces in the turnover numerator. Section 10AA(7) uses the export turnover of the unit over the total turnover of the business, and the statute's Explanation excludes freight, telecommunication charges and insurance attributable to delivery outside India, plus expenses incurred in foreign exchange in providing technical services outside India, from export turnover. Assessing officers routinely recompute the ratio in scrutiny when these exclusions are ignored, trimming a claim that looked complete in the return.

A fourth pitfall is eligibility drift. The 31 March 2020 sunset means no unit that commenced after that date can claim Section 10AA at all, and claims by such units are disallowed in full regardless of a validly filed Form 56F. A fifth, subtler mistake is the third-tranche reserve: the 50% deduction for years 11 to 15 is available only if the corresponding amount is credited to the SEZ Re-investment Reserve Account and used as the statute prescribes, and a shortfall here is added back under Section 10AA(3).

FAQ

What exactly did CBDT Circular No. 2/2025 change?

It extended the due date for filing Form No. 56F, the accountant's report required under Section 10AA(8) read with Section 10A(5), for Assessment Year 2024-25, from the specified date under Section 44AB (30 September 2024) to 31 March 2025. The circular is dated 13 February 2025 and carries F.No. 300173/11/2025-ITA-I. It was issued under Section 119(2)(b) to avoid genuine hardship, and it changed nothing else in the Section 10AA framework.

Does the extension also move my income tax return deadline?

No. Circular No. 2/2025 is confined to Form No. 56F. The Section 139(1) return due date for audit cases for AY 2024-25 remained 31 October 2024, and the Section 44AB tax-audit report timeline was not covered by this circular. Only the Form 56F certificate date moved to 31 March 2025.

Which units can claim the Section 10AA deduction?

Only units established in a Special Economic Zone that began to manufacture or produce articles, things or computer software on or before 31 March 2020. The deduction runs at 100% of eligible export profits for the first five consecutive assessment years, 50% for the next five, and up to 50% for a further five years subject to the SEZ Re-investment Reserve Account. Units commencing after 31 March 2020 do not qualify.

How is the Section 10AA deduction amount calculated?

Under Section 10AA(7), you multiply the profits of the business of the unit by the ratio of the unit's export turnover to the total turnover of the business, then apply the relevant phase percentage (100% or 50%). Export turnover excludes freight, insurance and telecommunication charges attributable to delivery outside India, and foreign-exchange expenses on technical services rendered abroad. So a unit with Rs 2,00,00,000 profit and a 0.90 export ratio in its 100% phase deducts Rs 1,80,00,000.

Is Form 56F mandatory, and who signs it?

Yes. Section 10AA(8), read with Section 10A(5), makes the report mandatory to support the claim, and it must be certified by a chartered accountant. A Section 10AA deduction filed without a valid Form 56F by the due date is liable to be disallowed. For AY 2024-25, the governing deadline is the 31 March 2025 date set by Circular No. 2/2025.

What happens if I missed even the 31 March 2025 extended date?

The statutory extension lapses, and the deduction is at risk of disallowance. Your remaining route is a separate application for condonation of delay under Section 119(2)(b), which the authorities decide case by case on the genuine-hardship test; it is discretionary and not guaranteed. The safer course is to treat the certificate date as a hard deadline in future years.

Is Section 10AA an exemption or a deduction?

Technically it is a deduction from total income computed under a prescribed formula, even though it sits in Chapter III and is often loosely described as an exemption. The practical consequence is that the amount is worked out under Section 10AA(7), reported in the return, and certified in Form 56F, rather than simply left out of income.