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Nasscom for I-T waiver for NRIs outsourcing jobs
December, 14th 2006

The Natioanl Association of Softaware and Services Companies (Nasscom) has recommended a slew of measures for the Indian IT sector in its pre-budget memorandum.

To boost the BPO industry as well as remove the concerns of non-residents, the industry body has sought clarifications in the Indian income tax legislation.

It has recommended tax exemption for non-resident Indians outsourcing their back-office processing and call centre activities to India. Nasscom has proposed introduction of a system of consolidated tax returns for group entities. This is expected to eliminate the economic distortions on account of inter-company transactions within the group and thereby ensure reduction in tax avoidance practices such as intra-group dealings, loss cascading and value shifting. As a result of implementing such a practice, tax effects on the dividends paid between companies would also be eliminated.

Under the foreign tax credit policies, it has asked for the incorporation of relevant provisions in the domestic law and rationalisation of transfer pricing rules. In consideration with the Advanced Pricing Agreement (APA) procedure followed in countries such as the US, Canada and Mexico, China, Taiwan, Korea, Japan, Australia amongst others, Nasscom has suggested APA mechanism to be followed in the coming Budget. It would like resources to be provided to the new APA office to allow them to process the required rulings.

STPI sops

Nasscom has also sought the continuation of tax exemption for Software Technology Parks beyond 2009 so that companies could continue availing themselves of benefits and have the time to adjust to the SEZ framework, which would take the next two-three years to get operational. Nasscom wants the extension to be made concurrent with the tax holiday provided for exporting units in SEZs.

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