Budget disappoints IT / ITeS sector

This year''s union budget offered some disappointments to the IT / ITeS sector. Proposals like the introduction of MAT, increase in dividend distribution tax and FBT on ESOPs came as negative surprises to the sector.

The sector will have to bear the additional burden of MAT of 11.22 per cent on the adjusted book profits. The 100 per cent EOUs, which were exempt from payment of tax, will henceforth have to bear the double burden of tax on income and expenditure (FBT). There is also no mention regarding the extension of tax holiday to the sector, says Sheetal Raut, head, finance, Synygy India Pvt Ltd.

Considering the consistent growth and profitability demonstrated by this sector, it appears to be a fair argument that the sector should contribute to the national exchequer. However, on the other hand, the increased tax collection on account of indirect taxes and taxes paid on salary by the employees in this sector and the FBT paid more than compensates the incentives extended to this sector.

There should have been no tax levy on this sector at least in the committed tax holiday period. It looks like it''s an end of the tax holiday for the software companies and the FM has given the signal by introducing MAT in this year''s budget.

As for the salaried individual, absolutely nothing is in store. Just a marginal relief given to individuals by increasing the basic exemption limit from Rs1 lakh to Rs1.10 lakh and Rs1.45 lakh for women. Medical insurance has been increased to Rs15,000 from Rs10,000.

It was expected that the FM would leave more money in the salaried individual hands by increasing the basic exemption limit or increasing the limit u/s 80C but only a marginal relief was extended.

Overall the budget was directed towards growth and more emphasis was laid on agriculture, healthcare sector and education.