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Union Budget 2021: Govt should rationalise safe harbour margins, lower interest rates on loans to boost ITeS, KPO, software development – India News , Firstpost


The authorities on its half has performed a crucial function in augmenting the attain of IT providers throughout India in numerous areas comparable to digital funds, infrastructure help and digital governance.

Representational Image. Wikimedia Commons

The yr 2020 will lengthy be remembered and analysed for one occasion, the COVID-19 pandemic which has modified the way in which we dwell, work and use expertise. This has underscored a brand new urgency for digital connectivity and innovation, ushering in an period for the expertise sector which will final effectively past the pandemic.

COVID-19 has disrupted the way in which through which IT firms work, with a big workforce working from residence through the pandemic. Digitisation of operations, creation of digital income streams, seamless buyer expertise, and subsequent-era workforce fashions are among the enablers of digital acceleration that the pandemic has triggered. Against this, challenges and threats associated to cybersecurity and privateness of information have the potential to grow to be main impediments for the expansion of the expertise sector.

The authorities on its half has performed a crucial function in augmenting the attain of IT providers throughout India in numerous areas comparable to digital funds, infrastructure help and digital governance. Timely interventions by means of relaxations for distant working, extending the sundown date for SEZ items, the extension of time for the realisation of foreign exchange receivables, establishing of a startup fund for assembly the funding wants of recent startups are among the measures that augured rather well for the business.

In the following Budget, from an total coverage perspective, the business is anticipating enterprise-crucial and daring coverage interventions to propel digital adoption throughout a number of industries, higher web infrastructure and sturdy knowledge safety regime. To obtain a aggressive taxation framework that could be a prerequisite to entice new investments within the sector, the federal government might think about extending the concessional tax price of 15 p.c to new SEZ items which generate incremental employment.

The business may also welcome readability with respect to tax-deductibility of particular COVID-associated bills
incurred for facilitating the distant working of workers.

Given that many international nationals had been stranded in India due to journey restrictions, consistent with the OCED
suggestions, the federal government might think about carving out exceptions from PE publicity on that depend. The situation relating to utilisation of SEZ Reinvestment Reserve for the aim of buying plant and equipment can additional be expanded to additionally meet the working capital necessities of the SEZ unit, owing to liquidity crunch attributable to COVID disruption.

To present tax vacation to startups in a real sense, the federal government can think about exempting DPIIT recognised startups from MAT legal responsibility and lengthening the interval for carrying ahead of losses.

Owing to the worldwide financial downturn attributable to COVID-19 , it appears much more compelling for the authorities to rationalise the safe harbour margins in addition to lower the interest rates on loans to guarantee that India retains its international attractiveness within the ITeS/KPO/software development and contract R&D area.

While the Indian Advance Pricing Agreement (APA) programme has been fairly profitable, the authorities could think about growing the workforce within the APA crew and introducing provisions which make APAs time-certain, which is able to assist in garnering extra participation in this system by IT/ ITeS firms.

Currently, the Special Economic Zone (SEZ) guidelines enable short-term make money working from home just for a restricted time interval in particular instances comparable to for workers who’re travelling, briefly incapacitated, and many others.

Given the OSP relaxations and the ‘new normal’ means of agile working, the sector expects the introduction of a extra liberalised regime.

Further, with an elevated focus on export earnings, the federal government should forthwith announce the speed of
Service Export from India Scheme (SEIS) for FY 2019-20, prolong such advantages for FY 2020-21 and proceed to enable such profit within the new Foreign Trade Policy.

The resilience proven by the sector through the pandemic and the help that the federal government has prolonged has improved confidence within the lengthy-time period development story of the sector. Innovation and progress within the expertise sector will definitely be a crucial consider driving India’s broader digital ambitions. With the expansion in digital demand and the emergence and adoption of latest applied sciences, the way forward for the sector appears each thrilling and promising.

The author is Partner and Head – Corporate and International Tax, KPMG in India.

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