Considering the need to enhance foreign investment and promote exports from the country and realizing the need that level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, The Government of India had in April 2000 announced the introduction of Special Economic Zones policy in the country, deemed to be foreign territory for the purposes of trade operations, duties and tariffs. The Special Economic Zones in India closely follow the PRC (Pupils Republic of China) model.

Currently, India has 15 SEZs, each an average size of 200 acres. The government has approved as many as 164 or more SEZs. 8 Export Processing Zones (EPZs) have been converted into SEZs. These are fully functional. All these SEZs are in various parts of the country in the private/joint sectors or by the State Government.

• Development of world-class infrastructure for export of goods and services and generation of significant additional economic activity.
• Positive net foreign exchange earnings.
• Promotion of investments from domestic and foreign sources.
• Creation of employment opportunities.
• Restrictions on sale of land
• The developer as to hold a minimum of 26% stake in the SEZ to retain all the benefits
• Minimum size requirements depending on products or services offered
• Maintenance of sovereignty and integrity of India and security of the states.

Type of SEZ.	Minimum Area	Processing Area
Multi product Multi product exclusively for services	1000 hectares (200 hectares in specified states) 100 hectares	35% or more of total area 35% or more of total area
Sector specific or in a port or airport	100 hectares	50% or more of total area
Electronic hardware and software, including ITES	10 hectares	50% or more of total area and minimum built up area of approximately 1.1 million sq. ft. (100,000 sq. m)
Biotechnology, non-conventional energy or gems and jewelry	10 hectares	50% or more of total area and minimum built up area of approximately 0.4 million sq. ft. (40,000 sq. m)
Sector specific (other than IT/ITES, biotechnology etc) in specified states	50 hectares	50% or more of total area
Free trade & warehousing zone (whether as a part of multi product SEZ or otherwise)	Only FTWZ: 40 hectares with a built up area of not less than approximately 1.1 million sq. ft. (100,000 sq. m) Part of multi-product: No area stipulation Part of sector specific SEZ: Maximum area is 20% of processing area
Note: 1 hectare = approximately 2.5 acres

• A designated duty free enclave and to be treated as foreign territory for trade operations and duties and tariffs.
• No license required for import.
• Exemption from customs duty on import of capital goods, raw materials, consumables, spares etc.
• Exemption from Central Excise duty on procurement of capital goods, raw materials,consumable spares etc. from the domestic market.
• Supplies from DTA to SEZ units treated as deemed exports.
• Reimbursement of Central Sales Tax paid on domestic purchases.
• 100% income tax exemption for a block of five years, 50% tax exemptions for two years and up to 50% of the Profits ploughed back for next 3 years under section 10-A of Income tax Act.
• Supplies from DTA to SEZ to be treated as exports under 80HHC of the IT Act.
  Carry forward of losses
• 100% Income-tax exemption for 3 years & 50% for 2 years under section 80-LA of the Income-tax Act for offshore banking units.
• Reimbursement of duty paid on furnace oil, procured from domestic oil companies to SEZ units as per the rate of Drawback notified by the Directorate General of Foreign Trade. SEZ units may be for manufacturing, trading or service activity.
• SEZ unit to be positive net foreign exchange earner within three years.
• Performance of the units to be monitored by a Committee headed by Development Commissioner and consisting of Customs.
• 100% Foreign Direct Investment in manufacturing, sector allowed through automatic route barring a few sectors.
• Facility to retain 100% foreign exchange receipts in EEFC Account.
• Facility to realize and repatriate export proceeds within 12 months.
• Re-export imported goods found defective, goods imported from foreign suppliers on loan basis etc. without G.R. Waiver under intimation to the Development Commissioner.
• "Write-off" of unrealized exports bills up to 5%.
• Commodity hedging by SEZ units permitted Capitalization of import payables.
• No cap on foreign investment for SSI reserved items.
• Exemption from industrial licensing requirement for items reserved for SSI sector.
• Profits allowed to be repatriated freely without any dividend-balancing requirement.
• Domestic Sales on full duty subject to import policy in force.
• No fixed wastage norms.
• Full freedom for subcontracting including subcontracting abroad. Subcontracting facility available to jewellery units.
• Duty free goods to be utilized in 5 years.
• Job work on behalf of domestic exporters for direct export allowed.
• No routine examination by Customs of exports and import cargo.
• No separate documentation required for customs and Exim Policy.
• In house customs Clearance.
• Support services like banking, post office clearing agents etc. provided in Zone Complex.
• Developed plots and ready to use built up space
• Exemption from Custom/Excise Duty on goods for setting up units in the zone.

• Developer of SEZ may import/procure goods without payment of duty for the development, operation and maintenance of SEZ.
• Income tax exemption for a block of 10 year in 15 years at the option of developer as per section 80-IA of the Income Tax Act read with Appendix 14-II-N of Handbook of Procedure.
• Full freedom in allocation of developed plots to approved SEZ units on purely commercial basis.
• Full authority to provide services like water, electricity, security, restaurants, recreation centers etc. on commercial lines.
• Foreign investment permitted to develop township within the SEZ with residential areas, markets, play grounds, clubs, recreation centers etc.
• Develop Standard Design Factory (SDF) building in exiting Special Economic Zones. Guidelines at Appendix 14-II-N
• Income Tax exemption to Investor's in SEZ's under section 10 (23) G of Income Tax Act.
• Exemption from Service Tax
• Investment made by individuals etc. in SEZ Company also eligible for exemption u/s 88 of IT Act.
• Development promoted to transfer infrastructure facility for operations and maintenance u/s 80-I-A of IT Act.
• Generation, Transmission and Distribution of Power in SEZs allowed.