The country’s IT services and BPO firms, that have been facing tough time with client budget cuts and increasing political pressure in the US and Europe, are looking forward to additional tax benefits in the Union Budget 2010-11. This time, it isn’t just the IT services and outsourcing firms that are seeking clarity on extension of 10A/10B tax holiday, but also IT software product firms too are looking at similar exemptions.
Recently, ministry of IT and communications secretary R Chandrashekhar said the IT ministry has recommended the finance ministry to align the benefits of the software technology parks of India (STPI) with those under the special economic zones (SEZ) in the forthcoming Budget. Chandrasekhar said, “In the software sector, they have been asking for continuation of benefits, which are due to expire on March 31, 2011. On the hardware side, they have been asking for greater stability in taxation so that they can plan in terms of customs, excise and corporate taxes,” he said. V Balakrishnan, CFO, Infosys Technologies said, “The STP tax holiday should at least be extended to smaller companies whose group turnover is less than Rs 100 crore as larger companies have the ability to manage it well.” Surjeet Singh, CFO, Patni, views that the expiry of STPI provision coupled with the anti outsourcing political legislation in the US could make India an uncompetitive offshoring destination.
Section 10A of the Income Tax Act provides for 100% deduction for 10 years of export profits made by units set up in any STPI. This tax benefit is due to expire on March 31, 2011.
Also, the industry is expecting abolition of minimum alternate tax (MAT) that was increased from 10% to 15% last year. Mukesh Aghi, chairman & CEO, Steria India said that increase in MAT has impacted the cash flows of companies, at a time when liquidity is critical and therefore the government could look at abolition of MAT on book profits of units operating in an STP/EoU. Tax experts feel that the government wouldn’t take a long-term call for the next two to three years for STPI. S Madhavan, ED, tax and regulatory services, PricewaterhouseCoopers, said, “Tax exemptions have a finite shelf life and we don’t expect the government to take a long-term decision on these benefits for the next two-three years.” At the same time, Indian software product companies that develop intellectual property and largely cater to the domestic market.
Source:http://www.financialexpress.com/news/IT-sector-looks-for-additional-tax-benefits/582549/
