Mumbai: Finance minister P Cahidambaram today announced a one-year extension of the income tax exemption for software companies under the Software Technology Parks of India (STPI) scheme to 31 March 2010, from next year.

''The income tax exemption for software companies has been extended to 31 March 2010, from next year,'' Chidambaram said while replying to a debate on the Finance Bill  in the Lok Sabha today.

Chidambaram proposed an amendment to extend sunset clauses on Software Technology Parks of India (STPI) and export-oriented units (EOU) to 31 March  2010.

The change has been made because the next budget is likely to be presented only after May 2009, the finance minister pointed out.

The IT sector has welconmed the extenasion amid a slowdown of the global economy and appreciating rupee that has squeezed margins for most IT com0panies.

''The steep appreciation of rupee against dollar in the past one year has impacted the overall margins of most IT companies, which is predominantly export oriented and the extension of tax benefits under STPI scheme will therefore be a welcome measure and relief," says N R K Raman, managing director  and chief executive officer, i-flex Solutions.

Chidambaram also proposed tax exemption to three new oil refineries being built by public sector oil companies. However, he added that the government will continue with its plan to withdraw income tax exemption for new refinery projects from March 2009. He, however, proposed an amendment to extend tax holiday for refineries if commissioned by March 2012.

"PSU refineries under construction have also been exempted from the sunset clause provision under section 80 IB," he said.
 
Quoting the UPA government's common minimum programme (CMP) he said: ''The government will initiate measures to increase the tax:GDP ratio by undertaking major tax reforms that expand the base of tax payers, increase tax compliance and make the tax administration more efficient. Tax rates will be stable and conducive to growth, compliance and investment.''

''In the last four years, I have succeeded to some extent in removing exemptions or imposing sunset clauses, but I cannot say that I am fully satisfied. Work in this regard would have to continue. Eventually, we would have to move towards a system of taxation where the exemptions are few, each exemption is reviewed periodically and each exemption comes to an end after a reasonable period of time. I am confident that the new income tax code that will be placed in the public domain for discussion will reflect my philosophy in this regard and I hope that, in due course, the new income tax code will, after deliberations, become law,'' he said.