IT body seeks extension of STPI scheme

MUMBAI (Reuters) - A Indian technology sector trade body has sought the extension of the Software Technology Park of India (STPI) scheme beyond 2009, especially for the benefit of small and medium firms.

Among other benefits, the STPI scheme which is set to expire in 2009, provides a 10-year income tax exemption for units situated in software technology parks.

"We have sought a blanket continuation,' said Lakshmi Narayanan, chairman of National Association of Software and Service Companies, on Monday.

"We have asked for a blanket continuation largely for the benefit of the small and mid-sized companies," said Som Mittal, president of Nasscom.

Large companies had the option of moving to Special Economic Zones (SEZ) to avail of the tax incentives there, but smaller companies would not find it feasible to relocate their operations to SEZs, he said.

SEZs, often located in and around large cities, also pose capacity constraints while high rentals pose a cost barrier for small companies.

"Extension of STPI will also encourage smaller companies to move to Tier II and Tier III cities," Narayanan said.

Nasscom has also sought relaxations in service tax and fringe benefit tax in a pre-budget memorandum to the federal finance ministry.