Allow tax benefit to IT sectors till 2009: K'taka CM

Bangalore, Feb 5: Chief Minister H D Kumaraswamy today requested the UPA government to let the IT sector continue to enjoy the tax benefit beyond 2009.

The previous NDA government at the Centre had in 1999 put in place a 10-year income tax benefit for small units in the IT sector which expires in March 2009. After that date, only special economic zones (SEZs) will get the benefit, unless an extension is made in the policy.

In a letter to Prime Minister Manmohan Singh, Karnataka CM has requested for the extension of tax holiday under Sections 10A and 10B of the Income Tax Act for units under the Software Technology Parks scheme. Failure to extend this tax holiday beyond 2009 would be an impediment for the growth of the small and medium enterprises (SMEs), he said.

Only 19 software companies in India, whose exports are worth more than Rs 500 crore, can establish their own SEZ campus and avail of income tax benefits.

Uncertainty about continuation of the tax holiday has put expansion plans of many multinational companies on hold. While the SEZ scheme would help to some extent, the dichotomy between the SEZ and the STP scheme will create inconvenience in the industry.

To boost IT, the Karnataka government offers special assistance, incentives and concessions for units with fixed assets of up to Rs 100 crore.