Budget 2020: Stimulate economic activity, boost consumption and allow tax exemptions to SEZs

Published: February 1, 2020 4:00 AM

Union Budget 2020 India: The IT sector in India provides significant opportunities for growth.

Budget 2020-21: The government should extend the sunset clause of the IT Act for SEZs for another five years.Budget 2020-21: The government should extend the sunset clause of the IT Act for SEZs for another five years.

By Diwakar Nigam

Union Budget 2020 India: With Budget 2020 just a few days away, the current sluggishness in the economy is a major concern for organizations. Budget 2020 should offer some measures to boost consumption and investment by stimulating economic activity through increased capital outlay across sectors. While there has been a lot of progress on the practical aspects and procedures on GST, some additional work is required to further simplify the processes to facilitate smoother business activities.

Business friendly policies required

The IT sector in India provides significant opportunities for growth. The government can further incentivize organizations for creating software intellectual property through tax exemption on IT exports. We expect that the government would bring more business-friendly policies and take steps to reduce regulatory compliance, providing a holistic environment for ease of doing business.

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Budget 2020: Encourage creation of rural e-infrastructure

Parameters like data security, privacy and compliance are also critical, the government should encourage the private sector to set up data centers across the country. In Budget 2020, the government should also continue to focus on initiatives such as Digital India, Skill India, and others, and emphasize on technologies that encourage digitization and creation of rural e-infrastructure.

Budget 2020: Create policies for innovation and global competitiveness

Another area of concern is the lack of incentives for engineering research and development (R&D). There is a strong need to create policies that enable innovation and promote initiatives to develop in India.

To bring about global competitiveness, there is a need to increase investments in skill development for new-age technologies such as artificial intelligence, big data analytics, robotics, and blockchain.

Budget 2020: Extend sunset clause of IT Act for SEZs

The government should extend the sunset clause of the IT Act for SEZs for another five years. The clause that allows income tax exemption to SEZs (where most of the IT firms are based) will end on March 31, 2020. India’s advantage is its talent base and its ability to scale. In the light of current economic growth and increasing global competitiveness, extending the sunset clause will give a big boost to the IT sector.

Streamlining the current SEZ processes will also create a more conducive business environment. The labour laws governing the IT sector also require streamlining owing to its unique requirements.

Further, to improve investor sentiment and attract more domestic and foreign investments, the government should consider the removal of dividend distribution tax or long-term capital gains tax in the impending budget announcement.

The columnist is Managing Director, Newgen Software. Views expressed are the author’s own.

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