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Advance tax by IT firms increases by 110 % to Rs 507 cr |
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| October, 10th 2007 |
IT companies may be struggling to cope with a rising rupee, but their tax payments are on an upswing. The total advance tax collection from IT companies in September grew by 110% to Rs 507 crore from Rs 242 crore in September, 2006. September 15 was the last date for payment of second instalment of advance tax. The first instalment had to be paid by June 15. The governments advance tax collections from IT companies in April-September 30, 2007, grew by a whopping 153.79%.
According to Nasscom estimates, for every 1% rise in the value of the rupee, Indian software-services exporters lose 30-50 basis points from their operating margins. The rupee is currently ruling at Rs 39.44 to a dollar compared to Rs an average of Rs 46.50 in August, 2006. However, the companies seem to have shown some resilience, if their tax payments are any indication.
Sources in the tax department attribute this increase to improved performance as also the imposition of the minimum alternate tax (MAT) regime in the Software Technology Park of India. MAT companies, as they are known, have to pay 10% of their book profits as tax.
The individual impact of these two components could not be ascertained. Prima facie this looks like a big hit, but most of the IT companies would have hitherto utilised their unutilised foreign tax credit, thereby lowering their effective tax liability in India, Ernst & Young Partner Amitabh Singh said.
The growth is tax collections has been all encompassing reflected by most of the players in the sector. HCL Infosystems tax payments rose by 1322% from Rs 4 crore to Rs 59 crore up to September, 2007. The government collected Rs 31 crore from HCl Technologies up to September, 2007, a growth of 749%.
Tech Mahindra paid advance tax of Rs 44 crore upto September, 2007, up 1000% from Rs 4 crore in the same period last fiscal. Tata Consultancy Services Ltd paid Rs 139 crore in April-September, 2007, a rise of 178%. The government collected Rs 125 crore from Infosys Technologies in the period under review, up by 67%.
Infosys paid Rs 100 crore in September, 2007 alone, double of what it paid in the same month last year as advance tax. Cognizant Technology Solution Indias advance tax payment upto September, 2007 grew by 92% to Rs 48 crore compared to Rs 25 crore in corresponding period last fiscal. Oracle India paid Rs 44 crore in the period under review, a growth of 59% over last year.
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