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Krishnan Thiagarajan

For the computer software industry, the Budget is forgettable. Instead of maintaining the status quo, the tinkering with Section 10 A and 10 B of the Income Tax Act has turned out to be a sore point. The Budget proposes to curtail the 100 per cent deduction on export profits to certain units (registered as EOU, EPZ or STP) under Section 10 A and 10B to 90 per cent. At a time, when the industry, especially frontline companies are working towards making India a major offshore outsourcing base, the reduction in Section 10A is a needless irritant. Even though the financial impact may be minimal (with tax incidence of around 3.675 per cent on offshore revenues), the signal that this deduction may be reduced further in coming years is far more distressing. Frontline companies such as Infosys Technologies, Satyam Computers, HCL Technologies, Wipro's Global IT Services Division and Digital GlobalSoft may witness near term selling pressure due to this development.

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