Tax holiday scheme for export-driven software companies extended in India - by parvati4AOM
Indian Finance Minister P. Chidambaram has extended the tax holiday scheme for export-driven software companies — set to expire in March 2009 — by a year. In my opinion, this move is timely and beneficial for an industry reeling under multiple whammies of an appreciating rupee, inflation and signs of slowdown in the US economy.
The move also benefits small and medium-sized IT firms. As for large companies already pursuing SEZ plans, the Finance Ministers move will enable them to enjoy the tax benefits further for a period of one year on their revenues derived from their existing STP operations.
Another argument gaining credence is that given the appreciating rupee, the Foreign Minister has decided to play a game of wait and watch. For instance, if the exchange rate does see a reversal in 2009, then by taking away this temporary benefit, industry will not be hurt. But by insisting on taking away the incentive when profitability has taken a beating does not allow companies to grow.