IN a much-sought relief by the IT industry, software companies can now enjoy benefits of the software technology parks of India (STPI) scheme for another year.

The government has extended the tax concessions under section 10A of the Income-Tax Act to March 2010. The scheme was to expire in March 2009 under the sunset clause provided in the scheme. On an average, IT companies would have a revenue benefit of at least 5-7% (on the effective tax rate) because of this extension. Normally, companies have about 50% business located in the technology parks, export revenue from which is exempt from any kind of tax.

In a letter to the prime minister, Union IT & communications minister A Raja said: "This (move) will certainly help the IT industry, especially the small and medium enterprises, which have been under tremendous pressure due to the rupee appreciation, wage inflation and several other factors. This would give us the encouragement to build up the momentum to meet our commitment of achieving IT exports of over $60 billion by 2010."

The relief has come after intense lobbying from the communication ministry and the industry. Finance minister P Chidambaram made the announcement in the parliament on 29 April 2008.

The present move will benefit the smaller companies more because they were unable to move into the SEZs. "This is a good move and benefits the small and medium-sized companies who were finding it difficult to move into SEZs due to space crunch and high rentals. Most of the larger companies are already pursuing their SEZ plans aggressively. This move will enable them to enjoy the tax benefits further," said Infosys Technologies CFO V Balkrishnan.


Source: Economic Times