Budget is clicking the right buttons to improve IT infrastructure

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: Amidst the mixed signals coming from the global markets, FM’s message delivers a promising note. It is a definite positive for the IT industry and will help create the right sentiment in the industry. We see moves in the right direction, right from extension of tax exemption for the IT units in Software Technology Parks of India (STPIs) to removal of FBT for the industry and employees to emphasis on key e-governance projects.

For the software services companies, ending of tax holiday for the units in STPI was a key area of concern. Extension of the 10A/10B extension will surely provide a breather. Though the extension has come only for one year, it is definitely a step in the right direction. This is particularly important for SMEs to facilitate their continued growth, who might not have the right resources to move into SEZs. This will also facilitate move into Tier 2 and 3 cities. The extension of this scheme is an important and necessary step to ensure continued growth for this sector.

For the employees, abolition of fringe benefit tax (FBT) will make Esops more attractive. Transfer pricing was a cause for concern. A dispute redressal mechanism for resolving these issues takes us in the right direction.

It is a great initiative to inject certainty in international tax and transfer pricing related issues faced by several IT companies. The move to increase investment in higher education, especially in the IITs and NITs, will greatly benefit the industry in the medium and long term. The increase in focus on higher education and research and development (R&D) investments will enable

India in maintaining availability of a highly skilled labor force as well as ensuring adequate emphasis on R&D.

On the domestic front, excise duty exemption on packaged software is a positive. Budget is not just positive for the industry, it is clicking on the right buttons to help improve IT infrastructure in the country. It is heartening to see investment in key egovernance projects with an emphasis on important initiatives like unique ID programme.