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IT companies scramble for setting up STP’s.

Mar 31, 2000

Following the Finance Minister’s announcement in the recent budget to allow Information Technology (IT) companies setting up Software Technology Parks (STP’s) before the 31st of March 2000, there has been a scramble among IT companies to apply for setting up such units as such units can avail the benefit of a ten year tax holiday. The number of applications filed ever since the announcement to date amount more than 1,500. This is more than the total number of applications filed so far since the inception of the scheme which amount to 1,300.

IT companies which were hitherto free from income tax on their export earnings are being brought under the net, with the recent announcement by the government to impose tax on 20% of exports progressively over the next five years till such income is fully taxable.

This move would have considerably affected the bottomline in the coming years as the bulk of their income is expected to be generated from overseas income.

One loophole is to set up units in Software Technology Parks, as the income derived from such units is totally tax free.

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