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Tax management, the Infosys way
August, 14th 2006
Infosys TEchnologies paid less tax for the year ended March 2006 - Rs 303 crore in absolute terms - compared to the previous year (Rs 325 crore) even though its revenues have been growing. Infosys reported revenues of Rs 9,028 crore for the 2005-06 fiscal and Rs 6,860 crore and Rs 4,760 crore in 2004-05 and 2003-04 respectively. Commenting on this, Mr V. Balakrishnan, Chief Financial Officer, said: "The decrease in the effective tax rate needs to be normalised." One of the reasons for the reduction in absolute tax, he said, was a writeback of Rs 20 crore in the second quarter of 2005-06. The company's annual report said that based on assessment by tax authorities, the company re-estimated its tax liabilities and wrote back this amount. Infosys also had a negative non-operating income on foreign exchange differences that impacted taxes. He added that the fringe benefit tax (FBT) of Rs 16 crore was not included in the profit and loss account. Aside from this, for every rupee earned in revenues, Infosys paid about 11 paise in tax this year - less than 14.8 paise and 15.4 paise paid in 2004-05 and 2005-06 respectively. "The effective tax rate would have to be around 13 per cent," he added. On whether the drop in tax was also due to some of Infosys's facilities coming under the Software Technology Parks of India's (STPI) tax-free scheme, he said: "No. Some of our units, contributing to less than 10 per cent of revenues, have come out of the tax holiday scheme for which we pay taxes."
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