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Budget Impact on Information Technology sector
Overall impact: Positive
Excise duty
Customs duty
- Customs duty on IT products and their inputs
and components have been reduced to 15% from current levels. The basic customs
duty on word processing machines and printed circuit assemblies of word processing
machines has been reduced from 20% to 15%
- No change in basic customs duty rates of computers
and computer peripherals (viz. 15%). However, removal of surcharge of 10%
on basic customs duty has resulted in reduction of effective rate on these
items from 40.55% to 38.74%.
- The basic customs duty on static converters
used in automatic data processing machines has been reduced from 20% to 15%
Other Changes
- Profits derived by the units located in the
software technology parks from the export of "on-site" services have been
made eligible for deduction like their other export income. Units located
outside these zones will also get the benefit of tax exemption on such export
earnings.
- Condition relating to transfer of ownership
of companies in sections 10A and 10B of the Income-tax Act will not apply
in respect of companies in which public is substantially interested. This
will facilitate mergers and acquisition in the IT industry
- Internet service providers and broadband networks
who commence their operations on or before 31/03/03 will get five-year tax
holiday and 30 % deduction for next five years retrospectively w.e.f from
01/04/00.
- The limit up to which Foreign Institutional
Investors (FIIs) can invest in a company under the portfolio investment route
has been increased from 40 % of the paid up capital of the company to 49%
of the paid up capital of the company. This is likely to have a positive impact
on IT industry.
- Indian companies wishing to invest abroad can
now invest up to US $50 million on an annual basis through the automatic route
without being subject to the three year profitability condition. This will
help IT companies to further expand their overseas operations.
- Indian companies that have issued ADRs/GDRs
can now acquire shares of foreign companies up to an amount of US $100 million
or an amount equivalent to ten times of their exports in a year, whichever
is higher. IT companies having high export turnover are likely to benefit
from this measure.
- In case of Export Oriented Units, and units
located in Export Processing Zones, Free Trade Zones and Software Technology
Parks, profits from 25% of their sales in the domestic market, which is currently
tax exempt, will now be taxed.
Rediff-Dun & Bradstreet Budget Impact Analysis
Budget 2001
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