Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

IT companies will see higher tax rates
Tue, 11 Jan Pre-Open

The Indian IT companies have seen a reversal in fortunes with the turnaround in global IT spending. But their worries are far from over. Staff retention and rupee worries are just some of the issues that the companies have had to deal with in recent times. To compound this, the software technology park of India scheme (STPI) is all set to come to an end by March 31st this year.

The STPI scheme is a 100% export oriented scheme for undertaking software development for export. As a result, IT companies could claim tax benefits on the income generated from the regions covered under the scheme. This scheme has helped IT companies in the past. The effective tax rates for most companies have been in the region of 10-15% thanks to the scheme.

However, in the Union Budget of last year, the government decided to pull down the curtains on STPI. The popular scheme ends on March 31st this year. The impact of this was visible in the tax rates of most IT companies over the past few quarters. The effective tax rates had started to rise. Unfortunately this is expected to continue in times to come.

Source: Company data

While Infosys has already started to witness higher tax rates in the recent quarters, TCS and Wipro are yet to see the same. As a result, they would be impacted more once the scheme is lifted.

However, the impact on mid-cap companies would be worse. Most of them have witnessed lower net margins due to effect of the dwindling demand in light of the global crisis. Compounded with higher tax rates, impact on their margins would be much more severe as compared to the larger companies.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "IT companies will see higher tax rates". Click here!


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms


Feb 19, 2018 (Close)