At a recent event organized by FICCI, Union Minister Nitin Gadkari said India is the fastest growing major economy in the world and will reach a GDP of $5 trillion by FY 2024-2025. This is an ambitious but realistic target given the strong and consistent growth of the Indian economy despite global headwinds. And with the rapid pace of digital transformation and adoption of emerging technology, the IT sector is poised to play a vital role in helping the country achieve this goal.
With this in mind, market leaders are eagerly awaiting the upcoming 2023-24 EU budget for all developments favorable to the IT sector. Here are a few areas where changes would be welcome:
Special Economic Zones (SEZ)
Over the past two decades, SEZs have played a key role in India’s rapid economic development – promoting exports, boosting domestic and foreign investment, facilitating infrastructure development, job creation and more. Technology companies have also benefited greatly from SEZs. However, there are some changes to the SEZ rules that can be made that will allow the industry to better take advantage of these benefits.
Smoother processes for the movement of goods between two SEZ units would be of great help to companies. It would be a welcome move to scrap old computers and laptops, after paying the remaining import duties on the open market.
Last year, the government introduced a comprehensive set of home-working rules and regulations for SEZ employees. Simplifying the remote work authorization process would be very helpful for companies based in SEZs.
Corporate Social Responsibility (CSR)
The government has recently made some changes to the CSR rules, requiring companies to meet CSR-related obligations as long as there is an amount in their CSR accounts that has not yet been spent, and limits on spending for the impact assessment that can count towards a company’s total CSR expenditure.
But there are a few additional steps that can be taken as part of the budget to make CSR compliance less of a burden for businesses.
Firstly, it would be appreciated if there is an easing of mandatory expenditures on CSR activities for companies with a net profit of Rs 5 crore by raising the threshold for companies with a net profit of Rs 50 crore.
Second, when calculating net profit, compensation paid to professional employee-directors should not be added.
These steps would certainly ease some of the burden on MSMEs in particular.
Personal income tax
There are many expectations from this budget in terms of personal income tax, from adjustments in income tax brackets, walking standard deductions, increasing the 80C exemption etc. Tax experts predict that there will be some tax cuts to increase disposition revenues and stimulate spending in the economy .
From a business point of view, it would be very beneficial if the Budget revised the existing personal income tax thresholds. In addition, to simplify tax compliance, the numerous tax exemptions could be abolished. This can be achieved by considering an alternative method of tax calculation – without exemptions, but with lower rates and higher base exemption limits.
Changes to SEZ procedures, relaxations to CSR mandates and revisions to income tax limits are just some of the measures the upcoming Union budget can take to ease compliance and some financial burden for IT companies. This will enable the industry to redouble its efforts to help India reach and ultimately exceed the USD 5 trillion GDP mark.
(The author is the chief financial officer of Fulcrum Digital. Opinions expressed are personal)
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