Software industry yearns for softer taxation

BANGALORE: The entire IT industry is anxiously waiting for the forthcoming union budget. Unlike the earlier years, the anxiety is not just for the hardware players alone, it is now for the software players as well. The software industry is awaiting the budget session to see if there is going to be any duty imposed on software exports and employee stock option scheme (ESOP), which they feel would affect their business and employee motivation.

The software industry players are calling for a smooth and soft budget. Many software exporting units are against having duty on software exports. As Mascot Systems Ltd. managing director V. Chandrasekaran says, "The Government should continue with the exemption under Section 80HHE for software exports at least for another couple of years mainly for the benefit of the small and upcoming software export companies." These companies feel that retention of benefits under Section 80HHE would be the best incentive that the government can offer, because they would have a key role to play in ensuring that software exports from India touch the expected $87 billion mark in the next eight years." TekEdge vice president Asia operations, S. Srinivasan also says, "The Union budget should continue to provide tax holiday for the first 5-7 years for a software export unit. After that, the organization would be strong enough to take on the world better."

The industry wants better infrastructure without the involvement of red-tapism in getting certain basic things done to promote the industry in India, especially in getting the telecom industry up and running fast. While some software industry players feel that the facilities already given by the government to the IT industry is good. As Kshema Technologies vice president - technical Anand Mutalik says, " We should not expect much. However, whatever is talked about taxing should not be done to software companies. Guidelines should be made clear for acquisitions and mergers in terms of RBI and FIPB clearance, especially when foreign companies are acquired - today it is a long process. There should not be taxing on ESOP scheme as this is one big attraction for attracting prospective employees. Apart from this, we should not expect much but we should perform and give back to country, based on the expectations kept on us."

In general, companies also want steps to be taken to increase the number of educational institutions and improve the quality of education. As Mr Chandrasekaran adds, "The teaching staff is currently under-paid and as a result, institutions are not able to attract the best quality faculty. The government could do this by encouraging industry participation by way of contributions to educational institutions. The government should take concrete steps to improve infrastructure - mainly the communication infrastructure. One way to do this would be by setting up an infrastructure fund with support from industry."