FM announces new sops for IT industry

BANGALORE: Union Finance Minister Yashwant Sinha on Wednesday announced fresh

set of sops for the infotech industry. Presenting the Finance Bill in the Lok

Sabha, he announced wide ranging measures aimed at offering a boost to the stock

markets and the IT industry.

One of the biggest demand of the industry has been heeded by the FM when he

announced that Employee Stock Option Plan would invite tax as capital gains only

at the time of sale of shares by the employee. Presently, the shares are taxed

at the time of exercising the ESOP option too.

The 10-year tax holiday scheme for software exports from Software Technology

Parks have been extended till 2010. In order to boost research and development

in the corporate sector, the FM has announced that the weighted deductions for

R&D expenditure by knowledge-based companies would be raised to 150 per cent

from the current 125 per cent. In addition, R&D companies will enjoy tax

holidays for 10 years. The government is also planning to set up a Rs 150 crore

fund for promoting R&D.

Mr Sinha also reinstated the pass through status to Venture Capital Funds

(VCFs), which was removed during the budget announcement. Consequently, there

will be no tax on the income of VCFs.

The stock market reacted sharply to the fresh announcements made by the FM

with the Sensex picking up 250 points in a matter of an hour on Wednesday. When

reports last came in this morning, the Sensex was at 4,461.75, up by 126 points

against Wednesday’s close.