NEW DELHI, INDIA: IT and Telecom Minister A.Raja indicated on Monday that he is planning to discuss the extension of tax exemptions provided to IT/BPO firms under the Software Technology Parks of India (STPI) scheme, with the Prime Minister and Finance Minister.
He is looking at an extension of at least two years beyond the current deadline of March 2010.
If such a proposal is approved, it will help Indian IT companies to maintain tax rates at FY10 levels in FY11/12 and potentially lead to a 3-4 per cent increase in our FY11/12E EPS for large Indian IT player, said financial services firm J.P.Morgan.
The financial services firm pointed out that it had argued last year when the initial one-year extension was provided, that such policy could lead to more such extensions from the government given continued pressure/lobbying from IT exporters.
In the backdrop of macro economic slowdown hurting the industry (especially the mid-sized and smaller players) leading to jobs being cut and fear of rupee appreciation, the government could be under more pressure to provide such an extension, it observed.
Moreover, clearance of such a proposal would indeed be positive for the Indian IT sector, opined J.P.Morgan.
“Further, we believe business stability in the June quarter followed by a recovery in the second half of 2009 would lend support to the stock prices,” it said.
“We remain positive on the Indian IT sector on a fundamental basis and maintain our preference for large cap Indian IT players Infosys, TCS and Wipro are our top picks,” the statement added.