IT sector's wishlist for Budget 2010

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posted on 14 years ago — updated on 1 second ago

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The government primarily needs to address the problems of the BPO sector.

The global financial meltdown and the strengthening dollar pulled down the Indian IT sector last year. The sector, which had been a major contributor to India's GDP, rebounded strongly from the global crisis by diversifying itself into various industry verticals and new geographies.

The worse hit by the meltdown was the business process outsourcing or BPO industry. And with US President Barack Obama planning to cut outsourcing, the future does look tense. The government needs to address the problems of the BPO sector, which is a significant contributor to India’s export earnings.

Extension of tax holidays or Sunset clause for IT companies were the most promising step taken in last year's budget. Also, exemption of service duty on packaged software from 12% to nil provided a further fillip. The duty waiver will prevent double whammy tax for IT enabled services.

However, closure of tax holidays extension from April 2010 would materially impact the bottom line of IT companies. The need of the hour is continuation of tax holidays.

Budget Proposals

2009

Extension of Sunset clauses by one more year for deduction in respect of export profits under sections 10A and 10B of the Income-tax Act.

Excise duty exemption on packaged or canned software on the portion of the value which represents the consideration for transfer of the right to use such software.

Abolition of Fringe benefit tax (FBT).

Increase in minimum alternate tax (MAT) on book profits from 10% to 15%, but with a provision of carrying forward the tax credit on MAT from seven years to 10 years.

Companies impacted by Budget Proposals: Infosys, TCS, Wipro, HCL Technologies.

2008

Increase in education outlay by 20% to Rs 34,400 crore
Increase in excise duty on packaged software from 8% to 12%
Imposition of 12% service tax on all customized software services

Companies impacted by Budget Proposals: Infosys, TCS, Wipro, HCL Technologies, Educomp, Everonn, NIIT

2007

Extension of MAT to IT companies
IT companies will be taxed at 11.33% on book profit
Inclusion of ESOPs in FBT with effect from 1st April 2008
Increase in e-governance outlay; Hike in education allowance by 34.2% to Rs 32400 crore

Companies impacted by Budget Proposals: Infosys, HCL Technologies, Wipro, TCS, Polaris

2006