Relaxation of startup ESOP norms, DDT removal for cos positive for IT industry: Experts

IT industry body Nasscom on Saturday said the government's Budget proposal to relax ESOP norms and dividend distribution tax removal for companies were positive, but lacked focus on accelerating services exports and R&D from India.

Nasscom President Debjani Ghosh said Budget 2020-21 articulated how technology is the bedrock of development and growth in India, and said the announcements on quantum computing centre, data centre policy and intellectual property rights (IPR) portal will create the digital infrastructure for industry and government.

"It's heartening that Budget 2020 has simplified the employee stock option plan (ESOP) policy and extended the tax incentives for up to Rs 100-crore startups over a 10-year period. Incentives for MSMEs like audit exemptions for up to 5 crore companies will enable ease of business for small companies," Nasscom noted.

It added that the removal of dividend distribution tax (DDT) -- a long-pending request from the industry -- will benefit companies that have global operations.

"However, the Budget lacked focus on accelerating service exports from the country... a future-ready special economic zone (SEZ) policy is needed and there was no indication of that in the Budget," Nasscom rued.

The focus on enabling more research and development (R&D) solutions from India through specific programs was not covered, while schemes on upskilling/reskilling did not find any mention in the Budget, it pointed out.

Nasscom said it will publish a more detailed analysis on the Budget and seek specific clarifications on key issues.

The Budget has proposed deferring the tax payment on ESOPs by five years, until employees leave the company, or when they sell their shares - whichever is earlier. ESOPs give ownership interest to workers and are an important tool for companies, especially startups employees to reduce attrition rates and retain top talent.

Internet and Mobile Association of India (IAMAI) said the proposals will promote entrepreneurship, and will boost investments.

"The focus on technology and digital infrastructure is a step towards realising the trillion-dollar economy and will open up new opportunities for demand generation," IAMAI President Subho Ray said.

The proposal to set up of investment clearance cell for entrepreneurs and offering assistance in funding is a welcome move, he added.

L&T Infotech CEO and MD Sanjay Jalona said the Budget's focus on artificial intelligence and targets set for quantum computing is a step in the right direction to strengthen India's position as a frontrunner in exponential technologies.

"The decision to build data centre parks for the private sector is a step towards making India a data economy superpower," Tech Mahindra MD and CEO CP Gurnani said.