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officials believe that on-site services exports are not exempted from income tax
under the new sections. The fact is that almost 60 percent of India’s software
exports are through on-site services. In 2000-01, out of the projected US$6.2 billion
of software exports, almost US$3.7 billion were realized from on-site services. The
requirement this year then is for on-site services to continue getting income tax
exemption under the new Sections 10A/10B of the Income Tax Act.
Another suggestion relates to SMEs (small and medium companies) which are
currently working on projects sub-contracted to them by larger software players.
It is being recommended that such companies and their services also be exempt from
income tax, a move that will boost the growth of this segment. Also, changes need
to be made in Section 10A/10B, so that we allow a tax holiday also for those companies
whose ownership changes during the year.
All in all, the industry is looking forward to an IT-friendly budget 2001. The hope
is that the Finance Minister will do a hat-trick and like the previous years live up
to the expectations of the software and hardware industries. In view of the Gujarat
earthquake, the Government has already levied a surcharge without waiting for
the Budget. Hopefully, this will be sufficient and no new levies will be imposed
by the Financial Bill 2001. A soft Budget in hard times might well be the answer
we are looking for this year.
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