BANGALORE, INDIA: The focus on small and medium enterprises (SMEs) and start-ups in the union budget for 2013-14 would help boost entrepreneurship across the country, the Indian IT industry representative body Nasscom said Thursday.
“Angel investing is critical for the country and recommendations on structuring through regulator Sebi (Securities Exchange Board of India) and providing pass through benefits is a step in right direction,” Nasscom president Som Mittal said in a statement here.
The National Association of Software and Services Companies (Nasscom), however, sought amendment to section 56 of the Income Tax Act, 1961, to make the pass through benefit applicable to investments above Rs.5 crore.
“We will work with the regulator and the Indian Angel Network to take this forward,” Mittal said.
Access to funds through easing restrictive conditions of listing on the SME Exchange will facilitate investments for innovative and young start-ups.
“Encouraging innovations for the common man through the National Innovation Council will support younger firms to build technologies relevant for the country,” Mittal said.
Noting that allowing CSR (corporate social responsibility) contribution to technology incubators in academic institutions would enable innovation,he said incubation was at a tipping point in the country and a policy environment would provide the right ecosystem for entrepreneurship.
“We hope this incentive will be extended to all incubators registered with DST (department of science & technology) and MSME (micro, small and medium enterprises),” he observed.
Terming the budget proposals as “responsible and reasonable” for balancing growth and inclusion, Mittal said despite constraints under which the economy was going through and the global recovery being tepid, Finance Minister P. Chidambaram had affirmed that doing business in India must be seen as easy, friendly and mutually beneficial.
“We had represented to the government the need for facilitating ease of doing business in India. In this context, we expect the ensuing foreign trade policy (to be announced in April) will provide thrust on boosting exports and also address specific issues pertaining to the IT industry,” he said.
Lauding the proposal to set up the tax administration reform commission, the software body chief hoped the commission would address issues faced by the IT industry to ensure interpretation of tax laws were consistent with the legislative intent of the policies.
“The finance minister’s emphasis on the need for clarity in tax laws, stable tax regime, non-adversarial tax administration and dispute resolution is reassuring to a progressive industry like ours, which contribute immensely in terms of investments, exports and job creation,” Mittal noted.
In the run-up to the budget, the government had addressed many concerns of the industry, including tax incentives to software technology parks, special economic zones and export-oriented units like eligibility for onsite services, research and development (R&D) services through a notification based on the recommendations of the Rangachary Committee.
“The finance minister has stated that another circular covering (software) development centres will be issued soon, while rules on safe harbor provisions will be considered after recommendations are vetted by March 31,” Mittal said.
The industry body had recommended that encouraging repatriation of profits from foreign subsidiaries will be a stable source of foreign exchange inflow.
“Our specific recommendation on removal of multiple taxation on dividends distributed from foreign subsidiaries has been accepted along with the extension of concessional rate of tax,” Mittal noted.
Similarly, the budget’s thrust on technology adoption through widening the core banking solutions and e-payment systems, leveraging post offices for offering real time banking services will offer long term benefit towards financial inclusion.
“The income tax department is also rapidly moving towards technology based processing and we hope to see benefits of simplified processes and transparency in tax administration,” Mittal added.
Nasscom, however, expressed disappointment on the absence of specific thrust to boost high value exports and on substantial increase in tax on royalty though DTAA offers a cushion.
“Exclusion of IT sector from the ambit of the investment allowance extended to investments in plant and machinery is a dampener,” Mittal lamented.