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What the tech industry expects from FY16 Budget

A look at some of the expectations the technology sector leaders have from the Union Budget

Itika Sharma Punit  |  Bengaluru 

The technology sector, which contributes around 9% to the country's gross domestic product (GDP), is hoping for a slew of measures in its favour in the Union for 2015-16.

If sources are to be believed, heavyweights have frequented government departments in Delhi over the last few weeks to voice their concerns and share their demands. There have been multiple rounds of intense discussions, with active participation from representatives across technology sub-sectors -- information technology (IT) services, hardware and software products.

Ahead of Finance Minister Arun Jaitley's speech, starting 1100 IST today, here's a look at the top expectations that the technology has from the Union Budget:

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CLARITY ON DIGITAL INDIA/SMART CITY: While the last under Prime Minister Narendra Modi's leadership had set an upbeat tone for India's technology sector with announcement of projects such as Digital India and Smart City, clarity on the way forward for these projects is widely awaited. A clear and detailed roadmap on execution of these flagship projects is unanimously the top thing that leaders and observers are waiting for.

TRANSFER PRICING: Lack of clarity on transfer pricing rules has been a long pending demand of the industry and despite several resolutions in the past, the industry still needs more clarity on the issue. According to large multinational companies, many of whom are embroiled in taxation disputes, clarity on transfer pricing rules can give investment a boost and increase investor confidence. In addition, aligning definitions of royalty with international practices is expected to provide a fillip to the software sector in the country and bring India at par with global norms.

SAVE STARTUPS: With the massive growth in software product startups in the country over the recent years, observers will keenly watch out for any measures to ensure a healthy and fair regulatory environment for these companies. Demands from the sector include easing difficulties to access funding for low asset based firms, reducing difficulties around investors who want to put money in the sector, and having clear taxation regime for startups to avoid extra burden on them.

FAIRNESS IN ELECTRONICS: Correction of the inverted duty structure for electronics items, which makes it cheaper to import goods than manufacture them locally. While, it has been corrected to some extent for a few items such as computers, the industry wants the solution to be applied across the board.

BOOST CONSUMPTION: While the country is known as the global technology hub, its own spending on technology remains low. Apart from increasing the domestic revenues of companies, IT can also play a major role in increasing efficiency, sustainability and competitiveness of industry across sectors. If technology heavy vision of the Rail Budget is anything to go by, there are several announcements expected which could boost domestic consumption of technology.

NEW WAYS FOR NEW AGE: While the traditional technology sectors have made their own demands, the new segments such as e-commerce and other online consumer businesses have sought differentiated policies and treatment to provide them the ease of doing business. These industries are faced with several regulatory and taxation issues, mainly because of archaic laws, which were formed prior to the inception of this sector in India. Among other things, e-commerce industry is hoping that the government would show a fresh path for bringing foreign direct investments (FDI) in retail.

AADHAAR CLARITY: While the government has clearly shown intent to continue with the Unique Identification Project (Aadhaar), industry will watch out for the roadmap for the project in the coming financial year. The project had hit a roadblock when the new government came to power in 2014, as many expected it to scrap this project, which was a flagship one for Congress-led United Progressive Alliance government.

SKILL SUPPORT: The largest private sector employer, with a workforce of over 3.5 million, the IT industry has sought for extended provisions on deduction for employment and skill development (Section 80JJAA), research and development (R&D) credits. Experts have also asked for new provisions such as offsetting manpower training cost, deferred tax credits for start-ups.

With inputs from Surabhi Agarwal

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First Published: Sat, February 28 2015. 08:48 IST