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Tax sops to boost India's IT competitiveness: Nasscom
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SME Times News Bureau | 21 Sep, 2019
Terming the tax relief as a positive step to promote growth, investment
and jobs, the Indian IT industry's apex body Nasscom on Friday said the
bold measures would increase India's competitiveness in software
services and products.
"The Union Finance Minister's
announcements in New Delhi earlier in the day will help improve the
Indian IT industry's global competitiveness and allow spends on
incubators help boost creation of a tech ecosystem," said the apex body
in a statement here.
Noting that the reduction in effective
corporate tax to 25.17 per cent from 30 per cent will empower tech
firms, the industry body said the benefits would create a vibrant
ecosystem and the economy as a whole.
"For firms entitled for the
earlier reduced basic corporate tax rate of 25.17 per cent, the
reduction will be 3.95 per cent from the effective tax rate of 29.12 per
cent," said the National Association of Software and Services Companies
(Nasscom) in the statement.
As benefit of the reduced corporate
tax of 25 per cent was not available to many IT/ITeS sectors that did
not meet the revenue threshold, the industry body had earlier sought
continuity of the SEZ tax holiday by removing the sunset clause.
"While
the SEZ sunset clause has not been extended, companies claiming tax
holidays, whose effective tax rate (after claiming tax holidays) is
higher than the peak 25.17 per cent can now choose to give up the tax
holiday claims and benefit from the new tax rate of 25.17 per cent,"
said the statement.
For companies continuing to claim tax
holidays and not opting for the switch have a reduced MAT rate of 17.47
per cent as against the earlier 21.55 per cent, which helps them in
reducing the cash tax outgo.
IT firms setting up after October 1
with investments in the hardware or fab sector to commence production
before March 31, 2023 will be benefitted by the incentivised corporate
tax rate of 17.01 per cent.
"Abolition of Minimum Alternate Tax
(MAT) for the new firms is a great incentive to manufacturing units,
which will also benefit from the rebate the finance minister announced
on September 14 to boost exports, replacing the Merchandise Export
Incentive Scheme (MEIS)," said the apex body.
Expressing relief
over the buyback tax exemption for listed firms which announced such
schemes before July 5, the IT body said the clarification would
encourage even other companies to go for it.
"The tax reductions
and exemptions will help the industry and the government to improve
opportunities for all sectors to achieve the $5-trillion economy mark by
2024," said the statement.
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