SEZ vs STPI vs GIFT City vs 80-IAC — Which Structure Fits Your IT Export Business

Indian IT and software exporters have four distinct tax-incentive structures to choose from, each with different eligibility, benefit profiles and sunsets. SEZ Section 10AA is the legacy giant whose new-unit window closed in 2020 but whose existing-unit benefits run to 2035. STPI provides operational benefits without the headline tax holiday. GIFT City IFSC is the post-2020 successor for financial services and select IT-export categories. Section 80-IAC is the startup-specific 3-year profit-linked holiday. This guide walks through each, compares them, and gives a decision framework for which structure fits your business.

The four-option landscape

SEZ — Section 10AA legacy

Section 10AA of the Income Tax Act provided a 15-year phased tax holiday for units operating in Special Economic Zones, structured as:

• Years 1-5: 100% deduction of export profits.
• Years 6-10: 50% deduction of export profits.
• Years 11-15: 50% of export profits, conditional on creation of an SEZ Reinvestment Reserve.

The new-unit benefit window closed on 1 April 2020 — no new SEZ unit setup after that date qualifies for Section 10AA. However, units that began operations BEFORE 1 April 2020 continue to enjoy the remaining years of their 15-year benefit. For an SEZ unit that started in 2018, the 15-year window runs until 2033 — five years of years-1-5 benefit, then year 6 onwards at reduced rates.

• For existing SEZ units — preserving the benefit through 2033-2035 means careful management of SEZ status, export ratio compliance, and SEZ Reinvestment Reserve creation in years 11-15.
• Acquisition / merger / amalgamation of SEZ units triggers specific anti-avoidance provisions — restructuring needs careful planning.
• MAT (Minimum Alternate Tax) at 15% applies even during the holiday — credit is available against future regular tax.
• For new IT exporters in 2026 — SEZ is closed. Look at GIFT City IFSC or Section 80-IAC instead.

STPI — Software Technology Parks

STPI is administered by the Ministry of Electronics and IT (MeitY) and provides operational benefits for software exporters. The income tax holiday under Section 10A / 10B that originally applied to STPI units sunset in AY 2011-12 — so for new units, STPI is now an operational rather than a tax structure.

Current STPI benefits:

• Customs duty exemption on import of capital goods used in software export.
• Single-window clearance for software export documentation.
• Bonded warehouse status for imported equipment.
• Statutory compliance support — Softex form filing for software exports.
• Ability to use 100% foreign equity / repatriate profits subject to FEMA.
• Eligibility for various State Government incentives in some states (sometimes tied to STPI status).

GIFT City IFSC — the new frontier

Gujarat International Finance Tec-City (GIFT City) and its International Financial Services Centre (IFSC) are the post-2020 successor structure for financial services, fund management, banking, and select IT/data services. GIFT City IFSC offers:

• 10-year income tax holiday for eligible IFSC units (specified activities).
• Lower MAT at 9% (vs 15% standard).
• Stamp duty exemption.
• GST exemption on most services rendered.
• Currency flexibility — can operate in USD, EUR, INR.
• Modern single-window regulatory environment under IFSCA.

Eligibility for IFSC unit:

• Activity must be on the IFSCA permitted list — banking, capital markets, insurance, fund management, ancillary fintech services, data centres for fintech, certain IT-enabled support services to overseas entities.
• Physical presence in GIFT City IFSC (Gandhinagar, Gujarat).
• Specific licensing from IFSCA — banking unit licence, capital market intermediary, fund management licence, etc.
• Annual reporting under IFSCA framework.

Section 80-IAC startup tax holiday

Section 80-IAC of the Income Tax Act provides a 100% deduction of profits and gains for any 3 consecutive financial years out of the first 10 years from incorporation. This is the structure most genuinely innovative IT startups should pursue.

• Eligibility — Pvt Ltd or LLP, incorporated 1 April 2016 to 31 March 2030 (per Budget 2025 extension).
• Turnover not exceeding ₹100 crore in any year of claim.
• DPIIT recognition + Inter-Ministerial Board (IMB) certificate required.
• Choose any 3 consecutive years out of first 10. Pick years with highest profit for maximum benefit.
• MAT still applies during the holiday — credit recoverable later.
• Mutually exclusive with Section 115BAA (22% corporate tax rate) — startup must choose one.
• Form 10CCB (audit report) mandatory with ITR claim, regardless of turnover.

See our separate detailed article on Section 80-IAC for full process and economics.

Side-by-side comparison

Decision framework

For an IT exporter in 2026 deciding which structure to pursue, the decision tree:

1. Existing SEZ unit? — Continue with Section 10AA benefits, plan the year 11-15 SEZ Reinvestment Reserve. Don't restructure unnecessarily.
2. Fintech / capital markets / banking / fund management activity? — Look hard at GIFT City IFSC. The 10-year holiday + 9% MAT + GST exemption is powerful for the right activity.
3. Innovative product / IP technology business in first 10 years of incorporation? — Pursue 80-IAC. Get DPIIT recognition and apply for IMB certificate. Unlocks both 80-IAC holiday AND Section 192(1C) ESOP deferral.
4. Pure services / contract development / outsourcing without IP? — STPI for operational benefits. Tax holiday via 80-IAC unlikely given IMB innovation threshold.
5. Mature IT exporter without SEZ / GIFT City / 80-IAC eligibility? — Operate under regular corporate tax (Section 115BAA at 22%). Optimise via R&D weighted deduction (Section 35(2AB)), accelerated depreciation, exports incentives via SEIS / RoDTEP residuals.

Common mistakes IT founders make

• Trying to set up new SEZ unit post 1 April 2020 — Section 10AA new-unit benefit is closed.
• Assuming STPI registration includes a tax holiday — it does not for post-2011 units.
• Setting up in GIFT City for pure SaaS without permitted IFSC activity — no benefit available.
• Opting Section 115BAA (22% corporate tax) before claiming 80-IAC in profitable years — once opted, 115BAA is irreversible and 80-IAC is foregone.
• Forgetting that all four structures have substantive review / certification requirements — paper compliance is not enough.
• Not coordinating MAT credit recovery — during 80-IAC and 10AA holidays, MAT is still paid; credit must be recovered against future regular tax.
• Restructuring SEZ units in years 11-15 without complying with the SEZ Reinvestment Reserve requirement — loses the year 11-15 50% benefit.