IT sector asks for extension of tax holiday
The information technology sector in the country has asked the Finance minister to extend the tax holiday for the Software Technology Park of India (STPI) scheme as the sector was still recovering from global recession.
IT firms are looking for the extension in the national budget to be announced in February. The income tax act has sunset clause under section 10A and 10B which gives tax holidays to IT/BPO companies operating under the STPI.
IT companies currently pay a minimum alternative tax of 15 per cent however the standard rate is worked out to be 20%. If the scheme is withdrawn then the sector will have to pay a corporate tax at 33 per cent.
Industry body Nasscom has asked for the parity between the entities in STPI scheme and the special economic zone scheme.
Leading Indian IT firm, Infosys Technologies' chief executive officer (CEO) and managing director, Kris Gopalakrishnan said that the government should extend the tax holiday for small and medium enterprises and rationalise the tax regime for the sector in the budget.
At a summit organized by Nasscom, Gopalakrishnan had said that the STPI scheme should be extended for small and medium enterprises with revenues of Rs 100 crore.
The scheme could help IT firms remain highly competitive in the global market. Government incentives for the SMEs could boost the growth of the sector as they account for nearly 40 per cent of the exports from the sector.
The sector is also expecting large scale e-government projects which could partner private sectors firms. The vice president of Nasscom, Sangeeta Gupta said that the projects in the public private partnership model should be given significance in the budget along with reforms in the education sector.
Analysts say that the budget should help the firms in the sector to retain more funds to invest and expand as they were still recovering from the slowdown.
The firms are also expecting solutions to the issues relating to the foreign tax credit structure and a secure regulatory framework for transfer pricing.
