IT Firms Only Within SEZs To Get Tax Sops.

In a bid to promote relocation of IT firms to Special Economic Zones (SEZ), the government is planning to provide tax concessions only to companies within the zones.

The move, aimed at taking the sector to a higher growth trajectory and enabling it to secure bigger share of the global pie, is also likely to make SEZs viable — as majority of the zones are designed to meet requirements of the IT sector.

As of now, profits earned from exports of IT/IT Enabled Services are entitled to Income Tax exemption under Section 10 (A) and 10(B) of the I-T Act under Software Technology Parks of India (STPI) scheme. It offers tax exemption to Export Oriented Units under the Act, which was extended by a year till March 2011. Under the SEZ policy, in the first five years 100 per cent tax exemption is granted and 50 per cent for subsequent five years.

So far the exemption, which was first announced for five years, has already been extended twice — once for five years and then for another one year, which expires on March 31. Sources indicate that the government intends to extend the exemption, subject to the condition that the service provider shifted to a SEZ. Industry representatives are apprehensive that the move can destablise the marginal players as stiff competition has already squeezed margins and shift to a SEZ would mean increase in expenditure.

Source : indianexpress.com