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IT cos will continue in Budget
February, 17th 2010

Minister of State for IT and Telecom Sachin Pilot on Tuesday expressed hope that the exemptions and benefits given to the Indian IT firms would be extended in the upcoming Budget to help them cope with the slowdown.

"It is important that we have a view which will foster investment and create job opportunities. The IT sector has been growing...and so we hope the exemptions and benefits that the IT sector has been getting, there would be some more relief given," Pilot told reporters here.

The sector currently employs about 2.5 million people directly and about eight million indirectly.

"It is expected that another one lakh people would be added this year," Pilot said.

The Indian IT sector was hit by the global financial meltdown and the strengthening dollar pulled it down further.

The industry has been demanding further extension of the sunset clause for deduction in respect of export profits under sections 10A and 10B of the Income Tax Act. This was extended in the last Budget to March 2010.

While IT companies pay a minimum alternative tax of 15 per cent, which was raised by 4 per cent in the last Budget, their effective tax rate is still around 20 per cent. When the STPI scheme ends, this will go up further.

The companies have also been demanding clarity in policy matters, especially SEZ and Direct Tax code.

"There are certianly ambiguities in the direct tax code which is not a budget issue but we have raised it and in case of SEZ, clarification and so on," Tata Consultancy Services Executive Director and Chief Financial Officer S Mahalingam said.

The extension of the tax holiday for a longer period was a good idea for the industry as a whole, added Mahalingam.

According to industry body Nasscom, India's software and BPO exports are expected to grow at an annual 13-15 per cent to touch $56-57 billion.

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