Increased spends in infra, defence, education give an extra fillip

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: The $40-billion IT sector has finally seen some relief with a number of tax exemptions coming out of the Union Budget. The expenditure in the infrastructure, defence, education and rural areas is expected to push IT spending in the country. The finance minister extended the Software Technology Parks of India under Section 10A of the Income Tax Act for another year. However, the industry had expected a five-year extension. Partha Iyengar, VP, distinguished analyst and regional research director, Gartner, said, “The one-year extension of tax holiday is a good move, but clearly puts that this scheme is not going to be continued, thus allowing companies to plan accordingly.”

H Tripathi, CEO & MD of Infrasoft Technologies, said, “Mid-sized companies will once again be unable to plan their investments in new premises and people into SEZs.”

However, the overall industry sees it as an important impetus, especially in the current times of economic downturn. R Chandrasekaran, president and managing director, Global Delivery, Cognizant, said, “The extension of the sunset clause on STPI by a year will benefit the entire industry.”

The government proposed exemption of excise duty and CVD on the packaged software and of fringe benefit tax. The government also proposed increase of minimum alternate tax from 10% to 15% and extension of period allowed to forward the tax credit from seven years to ten years. Sudhir Kapadia, partner, tax & regulatory services, Ernst & Young, says, "This is expected to bring immediate burden on the IT companies as MAT has been increased by 5%. However, it may be beneficial in the long term as the credit period has been increased by 3%."

Suresh Senapaty, executive director and CFO, Wipro Ltd, said, “FBT had a significant administrative overhead and its abolition is appreciated.” The government has proposed setting up of Unique Identification Authority of India with a provision of Rs 120 crore.