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22 March, 2021

Budget 2021: IT experts seek clarity on SEZ tax benefits, call for increased digital momentum & more

Unquestionably 2020 has been an unprecedented year and industry leaders hope that the upcoming budget will address the challenges faced by businesses and propel the economy towards faster recovery and growth.

IT experts opine that digital technology and connectivity will continue to be the cornerstone of India’s growth and leadership. Since the pandemic accelerated the shift to digital, they say there is a need to maintain this growth momentum, as it will have a cascading effect on creating efficient businesses, new jobs, and all-round development.

Lower interest rate regime

According to CP Gurnani, MD & CEO, Tech Mahindra, R&D spending must be increased to accelerate digital transformation and jumpstart education with a focus on next-gen technologies, skilling, reskilling and upskilling programmes to nurture young talent pool, subsequently accelerating a journey towards an ‘Atmanirbhar Bharat’ (Self-Reliant India).

"We also hope to see focused initiatives to boost consumer sentiment, accelerate infrastructure development, move towards a lower interest rate regime, and increase investments in key areas including healthcare and education," he said.

From an IT perspective, Gurnani expects the government to create a fund for product companies along with extended SEZ (Special Economic Zone) benefits in the new normal of remote working, besides nurturing an ecosystem for deep tech startups in areas including blockchain, artificial intelligence, augmented reality, and virtual reality.

"India is on the path of a higher growth trajectory and the vision of a $5 trillion economy can be achieved with a focus on economic growth and development," added Gurnani.

Sundararajan Sampath, EVP & Chief Financial Officer at CSS Corp, suggests that the upcoming tax regime must ensure that there should be 100 per cent clarity on the continued availability of SEZ tax benefits to all existing and new SEZ units even if they continue to operate on a WFH basis.

Furthermore, he said, "We hope all expenses to ensure WFH would be allowed as business expenditure. There should be no ambiguity on the allowability of such expenses."

He further said, "With the recent Karnataka High Court verdict in M/S Biocon Ltd. Vs Commissioner of IT, we hope the Employee Stock Option cost (Fair Market Value less strike price amortized over the vesting period of stock options) will be allowed as business expenditure."

"We also urge the centre to bring back the 80G deduction for CSR expenditure for companies opting for the new tax regime," added Sampath.

Fortify the digital momentum

If Jaya Vaidhyanathan, CEO, BCT Digital (Bahwan CyberTek group), had to sum up her expectations of the 2021 budget in two words, they would be: Cautious optimism.

She believes the government has been swift in its response to the pandemic and alleviating its impact on the industrial sector. "I expect this momentum to continue through increased infrastructure spending and stimulus to trigger economic revival," she said.

According to Vaidhyanathan, there is a pressing need for increased government spending that far outweighs the potential repercussions that come with the higher fiscal deficit – one of the focus areas thus far.

She said, "We must retain a positive outlook and approach the new financial year with cautious optimism. Rolling out of big-ticket projects will bring much-needed impetus in the form of more employment and ease of doing business. This will move money into the hands of the taxpayer, boost consumption and savings, both of which have taken a hit in recent times."

Nishant Rathi, Founder and CEO of NeoSOFT Technologies, points out "game-changing" policies that fortify the digital momentum in the country. He said five years after the successful launch of the 'Digital India mission' it's now time to accelerate this momentum.

"The latest announcement by PM Modi of Rs. 1,000 crore 'Startup India Seed Fund' will be a milestone. Moving further, the government should ease the compliance and filing guidelines for startups and eradicate the current penal provisions," he said.

"We are in a stage of 'Data Revolution' where every sector relies on 'data-driven' insights. This budget should accommodate data-policies that allow IT service-providers to elevate user experience as they protect and manage the data," added Rathi.

Srikanth Chakkilam, CEO, Cigniti Technologies, feels quite optimistic about the Union Budget 2021. He anticipated the government to create special provisions for the technology sector in its bid to achieve a trillion-dollar economy.

He further said, "The budget should promote incentivizing enterprises to adopt intelligent AI-driven quality assurance frameworks which will lead to higher performance, productivity and reduction in Cloud application and data security breaches."

"MSMEs over the past few quarters have shown muted growth, the budget needs to subsidize and incentivize the use of new-age technologies such as AI and ML in driving the growth of MSMEs," added Chakkilam.

Article Published on ‘The Bridge Chronicle’. Click here to read.