Easing IT tax woes: PM refers portfolio & FII to Shome comm

There have been two broad concerns that have been raised after the Budget this year, one was the retrospective amendment of Section 9 and the other were the IT industry concerns. He has handled the first set of concerns relating to the retrospective amendment in GAAR.

On the second set he has also set up another committee under the chairmanship of former CBDT chairman Rangarchary and this committee is going to look at three key areas. One is going to be taxation of development centers which are captive entities that are set up by MNC for R&D etc in India and these are particularly common in the IT, pharma as well as the automobile sector. So, this is going to be considered.

The second is the safe harbour provisions that were announced in the finance bill of 2010 will be enabled and now be finalized. These will bring in a degree of certainty for the tax payer.

So, every sector is going to have safe harbour provisions which are going to be clarified.

The third is that onsite services of IT companies over which there had been a lot of controversy with them coming under the tax net, the tax treatment of onsite services of IT companies will also be decided. These are services that are delivered by IT companies in their operations abroad. So, whether these come under the tax net in India will also now be clarified by this committee.

Nasscom has welcomed PM's initiative to bring in clarity on taxation issues. It says that the move demonstrates focus & commitment of the government towards IT sector closely working with MOF, directorate of international taxation and cbdt on specific issues. These are issues related to transfer pricing & onsite services consistent policy regime important for industry to continue to grow.

It also says that move will allay concerns of industry, global corporations and investors.