Government extends tax holiday for software firms

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April 30 – Giving impetus to Indian software companies to continue steaming ahead, Finance Minister P Chidambaram threw an extra year of corporate tax exemption to software exporters.

The Hindustan Times reported that the scheme aided by which the country’s US$41 billion IT export grew to global heights, was set to expire in March 2009. STPI was introduced in 1999 to give a fillip to the then nascent Indian IT industry. Companies located in STPI are not taxed on revenues earned from exporting software (which includes writing codes or computers of US & UK companies).

“As things stand, the Budget for 2009-10 may not be presented in February 2009 but only after the elections. In order to avoid any uncertainty as we draw close to March 31, .2009, it has been decided the exemptions continued until March 31, 2010,” Chidambaram said while replying to the debate on Finance Bill 2008-09 in the Lok Sabha.

"The extension of tax holiday for IT companies has been very timely and will help face the impending challenges of prevailing global economic uncertainties as well as strengthening Indian Rupee,” N. Ramachandran, CFO, iGATE Global Solutions told the HT.

“This benefit will also give us time to come up with other workable and acceptable options for the future, beyond 2010. The IT-BPO industry is expanding into smaller cities. It is important that we incentivate this move to Tier II and Tier II cities with STPI/ Special Economic Zone (SEZ) like benefits,” Nasscom said in a statement.