“The Union Budget lays specific emphasis on controlling fiscal deficit and accounts for adequate intervention from the RBI to curb issues of rising inflation. Sectors such as Agriculture, Infrastructure have been appropriately addressed in the budget but there isn’t as much focus on the Information Technology industry.
 
We believe that the inclusion of SEZs under MAT will reduce the productivity of companies, especially in the small and medium sectors which form a major chunk of the IT industry. While the increase of MAT from 18%-18.5% is notable, it will not have drastic implications among companies. Although new services are included for Service Tax increasing the input costs, the efforts to streamline and simplify the refund mechanism is a welcome step. The much awaited clarification regarding  taxation of Licensed Software has not come which is disappointing. Another welcome proposal is the reduction of tax on Foreign Dividends to 15%. This may increase the fund repatriation to the Parent companies in India.
 
Even though the budget does not mention any extension of the STPI scheme, we hope that the proposed Direct Tax code expected to be enforced in April 2012 will provide succour to the industry for its growth. We would also like to welcome the Finance Minister’s consideration of reducing the corporate surcharge by 2.5% which we believe will have a positive impact on the profitability of most companies. By enabling rural India to harness broadband internet, the Finance Minister has also provided a fillip towards the cause of penetrating internet to the grassroots of the country.”

Jeya Kumar – Chief Executive Officer, Patni Computer Systems