Link BPO promotion scheme with direct tax benefit: Assocham

Union Budget 2017-18 should link the India business process outsourcing promotion scheme (IBPS) with direct tax benefit, industry body Assocham has said.
"The government should allow assessees to claim depreciation on assets funded by subsidy under the IBPS," the industry body said in its pre-budget recommendation.
One reason why the government did not receive expected response for IBPS which was launched under the Digital India programme, Assocham said the overall benefit under the IBPS scheme gets reduced by 33 per cent as assessees cannot claim depreciation on assets funded by the government subsidy.
The IBPS offers subsidy of up to 50 per cent of capital expenditure or Rs 1 lakh per seat, whichever is lower, for setting up BPO units in small towns and villages and to create employment there.

As the government has offered capital support of up to 50 per cent of one time capital expenditure incurred, this expenditure will be reduced from the cost of capital assets which will, in turn, reduce depreciation amount.
"This will increase the direct tax burden on such assessees," Assocham said.
It also suggested setting up a Venture Capital pool initiated and coordinated by a bank/SPV (special purpose vehicle)/PPP (public private partnership) mode to boost availability of capital funds to the electronics sector.
It said that while contributors may be offered tax incentives on the dividend, manufactures may be provided with tax exemptions.