How to Apply for STPI/SEZ Benefits

Why STPI and SEZ Benefits Matter for Foreign Companies

India's software exports through STPI-registered units reached approximately INR 10.64 lakh crore in FY 2024-25, making the STPI scheme one of the most successful export-promotion frameworks in the country's history. For foreign companies establishing IT operations, R&D centres, or Global Capability Centres (GCCs) in India, choosing between STPI and SEZ registration is one of the earliest and most consequential decisions. For the tax-deduction sunset details that drive that choice — pre-2021 SEZ grandfathering versus the STPI and EOU holidays that expired in 2011 and 2012 — see SEZ vs STPI vs EOU tax and export benefits compared.

Both schemes offer significant advantages: duty-free imports of hardware and software, simplified customs procedures, and operational flexibility. However, they differ substantially in tax benefits, location requirements, compliance obligations, and export thresholds. This guide walks you through the complete application process for both, with specific costs, timelines, and documents required as of 2026. Before diving into the paperwork, it helps to be clear on what SEZ status changes (and doesn't change) versus a non-SEZ unit.

Understanding STPI: Software Technology Parks of India

STPI is an autonomous society under the Ministry of Electronics and Information Technology (MeitY), established in 1991 to promote and facilitate software exports from India. The STP scheme allows IT and ITES companies to import capital goods duty-free, access high-speed data communication infrastructure, and benefit from simplified export documentation.

Who Can Register Under STPI?

Eligibility extends to any entity engaged in software development and export, including:

• Indian companies (private limited or LLP)
• Wholly owned subsidiaries of foreign companies
• Branch offices of foreign companies
• Existing IT companies converting to STP units

There are two types of registration:

• STP Unit (STPI-registered): Units registered under the STP scheme with full duty-free import privileges and export obligations
• Non-STP Unit (STPI-certified): Companies not under the STP scheme but registered with STPI for SOFTEX form certification, which is mandatory for all software export transactions made up to 30 September 2026

Key Benefits of STPI Registration

STPI Registration: Step-by-Step Process

Step 1: Obtain Prerequisites

Before applying, ensure your company has:

• A valid Certificate of Incorporation (or branch office approval from RBI)
• PAN for the company
• GST registration
• A registered office or operational premises
• Import Export Code (IEC) from DGFT

Step 2: Prepare Documentation

The following documents are required for the STPI registration application:

• Memorandum of Association (MOA) and Articles of Association (AOA)
• Certificate of Incorporation
• Board resolution authorising the STPI registration application and nominating authorised signatories
• Copy of lease agreement or ownership documents for the premises
• Details of directors and shareholders
• Project report covering proposed activities, manpower plan, projected exports, and investment details
• PAN card of the company
• IEC certificate
• GST registration certificate

Step 3: Submit Online Application

Submit the application online through the STPI portal (stpi.in) to the jurisdictional STPI Director along with:

• Completed application form
• Processing fee of INR 2,950 (INR 2,500 + applicable taxes) paid via NEFT/RTGS
• All supporting documents in digital format

Step 4: Site Inspection and Verification

STPI conducts a verification of submitted documents and a physical site inspection of the proposed premises. The inspector verifies that the premises are suitable for software development and export operations, including adequacy of IT infrastructure, data connectivity, and physical security.

Step 5: Certificate Issuance

Upon successful verification, STPI issues the Registration Certificate. The certificate is valid for 3 years from the date of issuance and must be renewed before expiry. Total processing time is typically 10-15 working days from the date of complete application submission.

Step 6: Execute Bond and Bank Guarantee

After receiving the registration certificate, execute a legal undertaking (bond) in favour of the President of India for an amount equivalent to the customs duty exemption availed. A bank guarantee of 25% of the bond amount (or 5% of the bond for units with a good track record) is required.

Understanding SEZ: Special Economic Zones

Special Economic Zones are geographically demarcated duty-free enclaves, deemed as foreign territory for trade operations. They offer more extensive fiscal incentives than STPI, particularly the profit-linked deduction for SEZ units in section 144 of the Income-tax Act, 2025 (section 10AA of the Income-tax Act, 1961), but with stricter location constraints and compliance requirements. Section 144 is a grandfathering provision: it carries forward the remaining entitlement of units that had already begun to manufacture or provide services under section 10AA of the 1961 Act, and no new SEZ unit can enter the deduction.

Key Benefits of SEZ Units

Important Section 144 Conditions

The income tax deduction under section 144 is subject to critical conditions:

• The unit must have begun to manufacture or produce articles or things, or provide services, on or after April 1, 2005 and before April 1, 2021 under section 10AA of the 1961 Act. No unit commencing on or after April 1, 2021 can claim the deduction; units already inside the window carry their remaining entitlement through the full 15-year period under section 144
• The deduction applies only to export income; domestic revenue is taxed normally
• Foreign exchange earned must be repatriated to India within 6 months of the end of the financial year
• Units opting for concessional corporate tax at 22% under section 200 read with section 205(1) of the Income-tax Act, 2025 (section 115BAA of the Income-tax Act, 1961) must forgo the section 144 deduction

SEZ Unit Registration: Step-by-Step Process

Step 1: Identify an SEZ and Developer

Select an SEZ based on your industry sector, location preference, and available infrastructure. India has over 270 operational SEZs across sectors including IT/ITES, pharma, manufacturing, and multi-product zones. Contact the SEZ developer to confirm space availability, lease terms, and infrastructure specifications.

Step 2: Prepare Form F Application

Form F is the official application for setting up a unit in an SEZ. Prepare the following:

• General company details (name, CIN, registered address, date of incorporation)
• Details of directors and promoters with KYC documentation
• Products/services the unit will deal in
• Proposed investment amount (in INR and foreign currency)
• Expected exports and employment generation over 5 years
• Details of equity structure and foreign collaboration, if any
• Project report with financial projections

Step 3: Submit Application to Development Commissioner

Submit Form F through the SEZ Online portal (sezonline-ndml.com) along with:

• Copy of Certificate of Incorporation, MOA, and AOA
• Board resolution authorising the SEZ application
• Developer's offer letter confirming space allocation
• IEC certificate
• Demand draft of INR 5,000 as application fee

Total registration charges amount to INR 35,000 (INR 25,000 one-time registration fee + INR 10,000 annual system usage charges).

Step 4: Approval Committee Review

The Unit Approval Committee, chaired by the Development Commissioner of the SEZ, reviews the application. The committee evaluates the project's viability, expected export performance, investment commitments, and employment generation. Approval is typically granted within 15-30 days for straightforward applications.

Step 5: Receive Letter of Approval (LoA)

Upon approval, the Development Commissioner issues a Letter of Approval specifying the approved activities, investment commitments, export obligations, and the validity period (typically 5 years, renewable).

Step 6: Execute Lease Agreement and Bond

After receiving the LoA:

1. Execute a lease agreement with the SEZ developer and submit lease deed details through the SEZ Online portal
2. Bond the premises with Customs authorities
3. Execute a Bond-cum-Legal Undertaking (BLUT) in Form H on non-judicial stamp paper of INR 100, notarized and submitted to the Development Commissioner's office
4. Obtain GST registration specific to the SEZ unit (separate from any DTA GST registration)

Step 7: Commence Operations

Begin operations within the timeline specified in the LoA (usually 12-18 months). Ensure all compliance systems are in place, including SOFTEX filing (for exports up to 30 September 2026; the Export Declaration Form from 1 October 2026), quarterly performance reports, and annual performance reports to the Development Commissioner.

STPI vs SEZ: Choosing the Right Framework

The choice between STPI and SEZ depends on your business model, scale, and priorities. Use this comparison to guide your decision:

Ongoing Compliance After Registration

STPI Compliance

• SOFTEX filing: Mandatory for all software export transactions made up to 30 September 2026. File within 30 days from the date of the last invoice of each month through the STPI portal. From 1 October 2026 the separate SOFTEX form is replaced: under the FEMA (Export and Import of Goods and Services) Regulations, 2026, software and service exports are declared on the Export Declaration Form within 30 days from the end of the month of invoice, and the proceeds must be realised within nine months of the invoice date (twelve months if invoiced or settled in rupees).
• Quarterly reports: Submit performance data including export revenue, imports utilised, and employment to the jurisdictional STPI Director
• Annual Performance Report: Comprehensive annual report with audited financials, export performance, and NFE calculation
• Bond and bank guarantee renewal: Maintain valid bond and bank guarantee throughout the registration period
• Re-registration: Apply for renewal before the 3-year certificate expiry

SEZ Compliance

• Quarterly performance reports: Submit to the Development Commissioner within 15 days of each quarter end
• Annual performance reports: Submit with audited financials by September 30 each year
• NFE calculation: Maintain positive Net Foreign Exchange over the approval period (typically 5 years)
• Customs compliance: Maintain proper records of all imports and domestic procurements. Physical verification by customs is exempt for routine transactions.
• FLA return: If the unit has received foreign investment, file the Annual Return on Foreign Liabilities and Assets with RBI by July 15
• Income tax return: Grandfathered SEZ units claim the section 144 deduction in the ITR with supporting export turnover calculations

STPI and SEZ for Global Capability Centres (GCCs)

India's GCC market has grown to over 1,700 centres as of 2025, with many Fortune 500 companies operating technology, finance, and analytics hubs. Choosing between STPI and SEZ is particularly important for GCCs because of the scale of operations and long-term commitment involved.

GCC Considerations for STPI

Most GCCs setting up after 2021 choose STPI because the section 144 income tax deduction is no longer available for new SEZ units. STPI provides the critical operational benefit that GCCs need: duty-free import of servers, networking equipment, laptops, and software licenses. The single-window clearance process means a GCC can be operationally ready within 4-6 weeks of receiving STPI registration.

GCC Considerations for SEZ

GCCs already operating within SEZs before the 2021 cutoff continue to enjoy the section 144 deduction for the balance of their 15-year window. However, these centres face practical constraints: they cannot relocate to non-SEZ premises without losing tax benefits, must maintain separate GST registrations for SEZ and non-SEZ operations, and face Development Commissioner oversight for any changes in approved activities. GCCs evaluating expansion should carefully assess whether the remaining years of the section 144 deduction justify the operational rigidity.

Hybrid Model

Some companies operate a hybrid model: SEZ unit for export-focused operations (capturing the remaining section 144 entitlement) and a non-SEZ or STPI unit for domestic-facing activities, R&D, and functions that require operational flexibility. This requires maintaining separate legal entities or distinct units within the same entity, each with its own compliance framework.

Recent Regulatory Changes (2025-2026)

Several recent developments affect STPI and SEZ operations:

• Semiconductor SEZ relaxation (June 2025): India reduced the minimum land requirement for SEZs dedicated to semiconductor and electronic component manufacturing from 50 hectares to 10 hectares, lowering entry barriers for chip fabrication units
• STPI expansion: STPI-registered units created approximately 2.98 lakh jobs through March 2025, with the government expanding STPI centres to Tier-2 and Tier-3 cities to promote distributed IT growth
• GST simplification: SEZ units benefit from streamlined GST procedures, with supplies to SEZ units treated as zero-rated supplies under Section 16 of the IGST Act
• DESH Bill status: The Development of Enterprise and Service Hubs (DESH) Bill, proposed as a replacement for the SEZ Act, has been under consideration. If enacted, it would convert SEZs into Development Hubs with more flexible rules. Companies should monitor this legislation.

Common Mistakes to Avoid

• Mixing DTA and STP operations: STPI-registered units must maintain clear separation between STP activities and any domestic business. Revenue and expenses must be distinctly tracked.
• Missing SOFTEX deadlines (exports up to 30 September 2026): Late SOFTEX filing can result in export proceeds being classified as non-software exports, losing the associated benefits
• Choosing SEZ for new operations expecting the SEZ deduction: New SEZ units commencing on or after April 1, 2021 are not eligible for the section 144 deduction, which only grandfathers units already inside the section 10AA window. Evaluate whether duty-free imports alone justify the higher compliance burden of SEZ.
• Inadequate bond/guarantee: Failure to maintain bond and bank guarantee at the required levels can trigger duty recovery proceedings
• Ignoring NFE obligations: Both schemes require positive Net Foreign Exchange. Companies with significant domestic procurement or DTA sales must ensure they maintain positive NFE over the approval period.

Cost Breakdown

Transition Between STPI and SEZ

Companies occasionally need to transition from one scheme to another. An STPI unit relocating to an SEZ must apply for a fresh Letter of Approval from the Development Commissioner and surrender its existing STPI registration after fulfilling all bond and export obligations. Conversely, an SEZ unit moving out must obtain approval from the Development Commissioner, pay applicable duties on assets being moved to the DTA, and apply for fresh STPI registration if continuing software export operations.

The transition process typically takes 3-6 months and requires careful coordination between STPI authorities, Customs, the Development Commissioner, and the company's compliance team. During the transition, the company must ensure there is no gap in export documentation and SOFTEX filing (or, from 1 October 2026, Export Declaration Form filing).

Key Takeaways

• STPI is ideal for flexibility: No location constraints, faster registration at INR 2,950, and moderate compliance make it the default choice for IT companies, startups, and distributed teams
• SEZ offers maximum tax benefits for units that commenced before April 2021, with up to 15 years of income tax deductions under section 144 of the Income-tax Act, 2025; the window is closed to new entrants
• Both schemes require positive NFE: Your export earnings must exceed your imports and domestic procurements over the approval period
• SOFTEX filing is mandatory for all software exports made up to 30 September 2026, whether registered under STPI or not; from 1 October 2026 they are declared on the Export Declaration Form
• Professional guidance recommended: Engage a CA or CS familiar with FEMA and RBI compliance to handle bond execution, customs procedures, and ongoing reporting