Exemption of Interest from Surplus Funds in Bank FDs allowable u/s 10AA of Income Tax Act for Exporters in SEZ:

The Karnataka High Court ruled that interest earned from surplus funds kept in bank fixed deposits (FDs) by exporters operating in Special Economic Zones (SEZs) is exempt under Section 10AA of the Income Tax Act. The court held that such interest income qualifies as profits derived from the export of services and thus falls within the exemption provided by Section 10AA. This judgment provides significant relief to SEZ-based exporters, affirming that interest from surplus funds, when linked to the business of export, is eligible for tax exemption. The ruling is expected to benefit many businesses operating in SEZs, enhancing their financial viability.