India’s IT-BPM sector seeks clarification on SEZ tax exemptions
The Information Technology-Business Process Management (IT-BPM) industry in India is asking the government to clarify the tax exemptions of Special Economic Zones (SEZ) as most of their employees are working remotely.
Under Section 10AA of the Income Tax Act, taxpayers are allowed deductions for businesses that are established in SEZs.
However, they are required to transfer part of their profits and activities to the SEZ reserve and utilize this for acquiring plant and machinery for three years after it was built.
According to industry body Nasscom, “an aggressive interpretation of Section 10AA could lead to instances where officials may consider that work done remotely by workers of the SEZ unit is ineligible for the tax holiday.”
IT-BPM companies also invest more in laptops, desktops, servers, and networking equipment instead of machinery.
Further, due to the accelerated digital shift, the on-site assets of outsourcing agencies have been reduced to third-party clouds and infrastructure.
Nasscom has recommended that SEZ guidelines should include expenses incurred on leasing desktops and laptops, using cloud infrastructure, buying software, and investment in building, infrastructure, workstations, interiors, furniture-related costs.
The agency said that this move will “incentivize IT companies to make additional investments in SEZs, thereby contributing to exports and creating additional employment opportunities.”
