'Union Budget 2002-2003 is an average budget for the IT Industry'

A. G. Muralikrishnan, Chief Financial Officer, Aztec Software and Technology Services

The Union Budget 2002-2003 is an average budget as far the IT Industry is concerned. Restricting the deduction u/s 10A/10B to 90% is definitely not a step in the right direction. The message so far conveyed to the IT industry is that 100% deduction will be available till 2010. Investments that have been made based on this premise would be affected. Although 10% of the profits being taxed is not so significant, it definitely sends a signal of uncertainty vis-à-vis the quantum of deduction for the subsequent years.

Taxation of dividends is a step in the reverse direction because this decisively brings back the concept of same profits being taxed twice. With the increase in Corporate as well as individual taxes as a result of the 5% surcharge the impact on this count will be even more. The tax payouts by Corporates who have invested in Mutual Funds will also be higher as a result of dividends being taxed. Savings on account of abolition of 10% distribution tax by Mutual Funds will be more than offset by the Corporate Tax of 36.75%.

On the other hand the Budget seems to have addressed the infrastructure sector. Commendable is the small beginning that has been made with respect to reduction of Government workforce by 12,500.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff Budget Special
The Rediff-Capital Market Budget Analysis
More Budget Stories
Money