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Government hands out IT sops. - Views on News from Equitymaster
 
 
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  • May 4, 2000

    Government hands out IT sops.

    The finance minister announced a series of sops for the IT industry. Firstly income tax benefits would be extended on a graded basis to software units set up in free trade zones, software technology parks and export oriented zones.

    Hitherto only those units set up before the 31st of March 2,000 would be eligible for complete tax exemption from income from these units. This had created a scramble among software units to register themselves before the deadline of 31st March.

    Sustained earnings growth of HDFC in FY2000Under the new announcement, companies registering from now onwards would be eligible for benefits on a graded basis. For instance a company registering in the year 2000-2001 would be eligible to tax benefits for nine years till 2009-10.Thereafter a company registering in subsequent years till 2009-10 would be eligible for tax benefits on a graded basis till the year 2009-10.

    This news will come as a whiff of fresh air for those companies that missed the bus by not being able to register in time. This creates a level playing ground between IT Companies that registered before the 31st of March this year and those that did not.

    These companies would thus be able to escape being taxed for exports to the tune of 20% on export income gradually over five years till they are completely taxable. This will boost the bottomlines of these companies.

    As a result of the announcement, prices of software companies that sharply fell smartly recovered on the bourses. The other sop offered is an exemption from taxability for employee stock option schemes (ESOPS) at the receipt stage. The ESOPS will now be taxed only at the time of sale. This will facilitate software companies to retain talent by announcing more stock option schemes as hitherto employees were reluctant to receive them previously because of the taxability factor at the receipt stage.

    Overall these announcements are bound to add cheer to otherwise lacklustre markets and revive at least the IT stocks.

     

     

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