The IT sector deserves better

Kris Gopalakrishnan

Kris Gopalakrishnan
President, Joint Managing Director and Chief Operating Officer
Infosys Technologies Limited

This budget is a mixed bag. On the fiscal front, there have certainly been great improvements.

Tax collections are up, growth is up. Spending has increased for the social sector, though nothing radical has been proposed. Neither are there any transformational initiatives. Higher education deserved much more but we have seen less.

Overall, the budget has certain positives, but the taxation proposals are neutral at best.

On the tax front, reducing custom duty is welcome, extending the Technology Upgradation Fund to the textile industry is great, but one would have expected a reduction in the excise rates to expand the industrial market for India. Tax increases in the corporate sector will greatly hurt sentiments since tax collections on the corporate side have gone up by 40%. Certainly, the industry was looking for relief from surcharge levies. The increase in the dividend distribution rate and levy of 1% surcharge on tax rates has created enormous negative sentiments.

The IT sector is growing at a rapid pace and the industry expected no change in the 10A, 10B regime while expecting an extension of time frame. Obviously, this has not come about in the budget but the changes in the budget to bring 10A and 10B companies under MAT is a retrograde step as commitments have been made to keep the exemption going till 2009.

The IT sector this year will create 380,000 jobs, which comprise 50% of the total jobs created globally, and the largest number of jobs in the organized sector in India. The FBT levy on stock options adversely affects one of the major employee retention tools for the IT sector. The IT sector deserves better because of its job creation potential.

Overall, the budget does not have anything positive for the IT sector.

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