Hindustan Times

Sops for Software Finance Minister announces IT-friendly Budget

The IT industry’s faith in Finance Minister Mr. Yashwant Sinha and IT Minister Mr. Pramod Mahajan has been vindicated. For the third year running, the finance minister has come out with a budget that is oriented to needs of this burgeoning industry.

The Finance Minister has been very kind to the software sector. He has allowed on-site services to be exempted from income tax with retrospective effect. Almost 60 percent of India’s software exports are through on-site services. In the year 2001-02, out of the projected software exports of US$ 6.24 billion, almost US$ 3.7 billon will be through on-site services. Also, the Finance Minister has allowed an income tax holiday to those listed companies that get acquired. This has been a kind of correction over last year’s budget.

The stock markets too will find reason for cheer in the fact that the Finance Minister has increased the FII investment cap from the erstwhile 40 percent. Also, the dilution of the draconian laws of the AR/GDR policy as well as the revolutionary announcement of two way fungibility are great news. If the market conditions in the US improve, we can think of 100 Indian tech companies listing on American Stock exchanges in the next five years.

The emphasis on IT education too has been laudatory. Not only is the IIT base in India going to be expanded with Rourkee joining the ranks of the august IIT circle, the country’s RECs will also get upgraded. Meanwhile students across the land will be incentivized to learn through easy educational loan schemes. Thanks to some of these visionary steps, India can end up meeting its gargantuan skilled manpower targets for the year ahead. The Finance Minister has secured the future of many young Indians.

Also, there is some good news in the form of a status-quo being maintained. No e-commerce tax has been imposed and neither have the export incentives provided earlier been withdrawn.

The government has announced computerization of major departments like customs, excise and passport by March 2002. This is good news and will inspire more hardware and software sales. But I wish there had been a reduction in excise and custom duty on hardware. That would have brought computers within easy reach of the masses. While the Finance Minister has been very kind to the software sector, he has tried to mop up some money from companies which were EOU, STP units, but were selling in the domestic area. He has also taxed some of the domestic IT-enabled services like on-line information and database retrieval services. However, the export of IT-enabled services has been spared from income tax.

The good news for telecom companies is that the government has allowed a 100 percent income tax deduction for Internet and Broadband service providers if they set up units before March 31, 2003. Even after first five years, they will get a 30 percent deduction. This means more investment and more proliferation of Internet and broadband.

Once again, this has been a great budget for the software sector. The hardware issues need to be resolved and probably will be taken care of in the EXIM policy. After all, S denotes both Sinha and Software Superpower!