IT firms to benefit after government clarifies on taxes

BANGALORE Thu Jan 17, 2013 8:27pm IST

Workers are pictured beneath clocks displaying time zones in various parts of the world at an outsourcing centre in Bangalore February 29, 2012. REUTERS/Vivek Prakash/Files

Workers are pictured beneath clocks displaying time zones in various parts of the world at an outsourcing centre in Bangalore February 29, 2012.

Credit: Reuters/Vivek Prakash/Files

Related Topics

Stocks

   

BANGALORE (Reuters) - India's $100 billion IT outsourcing sector, which earns the bulk of its revenue from exports of software services, won a long-sought and favourable clarification over the tax treatment of some of the money it earns overseas.

Profits from software developed overseas by Indian companies and from fees for sending staff abroad to client locations will get the same exemptions that the industry gets at home under Indian tax laws, the government said in a statement on Thursday.

"Overall, it's a positive move. It's a welcome measure that clears the air and avoids future litigation," S. Balasubramaniam, chief financial officer of Zensar Technologies (ZENT.NS), an Indian outsourcer, told Reuters.

In one instance involving such taxes, No.2 outsourcer Infosys Ltd (INFY.NS) is contesting tax claims of about 14 billion rupees, including interest, related to the fiscal years 2005-2008, the company said in a recent quarterly filing with the U.S. Securities Exchange Commission.

Infosys said it was "delighted" with the clarification.

"It removes one big uncertainty for the industry," the company said in a statement.

The National Association of Software and Services Companies, or NASSCOM, an industry lobby, said the government's clarification was a positive step.

"We urge that benefits denied in the past be reviewed in light of this move and there be swift closure of cases for the industry to benefit from this," NASSCOM said.

(Additional reporting by Manoj Kumar in New Delhi; Editing by Tony Munroe and David Holmes)

FILED UNDER:

REUTERS SHOWCASE

Flying Back on Course

Flying Back on Course

The inside story of the new Airbus A350 jet  Full Article 

Oil Prices

Oil Prices

Oil rebounds above $62, tracking broader markets  Full Article 

Tracking Gold

Tracking Gold

Gold inches higher on weaker dollar, Asian buying  Full Article 

Cyber Attacks

Cyber Attacks

China condemns cyberattacks, but says no proof N.Korea hacked Sony  Full Article 

World Stocks

World Stocks

Oil and rouble rally into Christmas period  Full Article 

Connecting Markets

Connecting Markets

China stock connect scheme scorecard throws up surprises  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage