Budget impact on Software Industries

The much debated Software Technology Parks of India (STPI) tax benefit has ended. No more tax benefits for the STPI units.

What does it mean? Small companies in the IT & ITES sector will suffer to compete with others. No impact for bigger companies, as they are not hit much because of this tax benefit.

Small and medium companies price their products / services based on the tax benefits (thought it is not the correct way). In the competitive world, they have to do this.

People look only at the tax payment. Actually, it is nothing but deferring the tax to a future date, as there is a MAT on companies.

After STPI, companies started to look at SEZ (Special Economic Zone). But even SEZ is not spared from MAT (both the developers & Companies operating in SEZ are covered under MAT). This will dampen the profits.

What is there in the budget, which makes the IT sector to smile?
  • the surcharge has been reduced from 7.5% to 5%. But MAT has been marginally increased by 0.5% (from 18% to 18.5%).
  • reduction of foreign dividend tax rate to 15% for Indian companies
  • Lot of IT spending by the Govt towards UID, e-stamping, computerisation for GST means more business for the IT Industries (if it is given to private IT companies).
This budget, i would say, is neutral to the IT / ITES sector. The sunset clause (STPI) was as expected.

I think we should come of the exemption / concession mode and this is in the right direction.


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Union Budget - 2011 - Snapshot

Yet another budget from Mr.Mukerjee. The intention is to step up the pace for a double digit growth in the years to come.

Some salient features of this budget (as I could manage to hear from the net) concerning individual tax payer:
  1. Firm on the 1-Apr-2012 deadline for the Direct Tax Code (DTC)· FDI policy to be liberalized further
  2. Individual tax payers get a flat Rs.2,000 (as the basic exemption limit increased by Rs.20,000) - further benefit to Senior citizens
  3. Senior citizen - Qualifying age limit lowered to 60 years (we can think of retiring soon) and the basic exemption limit increased by Rs.10,000.
  4. Senior citizen, who is 80 years & above will have the basic exemption limit at Rs.5,00,000.
  5. Additional deduction of Rs.20,000 for investment in long-term infrastructure bonds to continue for one more year.
Corporate (major items relating to tax rates):
  • Surcharge on corporate lowered to 5%Cheers,
  • MAT rate increased by 0.5% to 18.5%
  • Lower rate of 15 per cent tax on dividends received by an Indian company from its foreign subsidiary
The Fiscal deficit kept at 4.6% of GDP for 2011-12. To me, this budget is a good one, given the situation. We need to see how the government going to grow, contain the risk and not widening the deficit.

I will go through the text of the speech in details and post a detailed one covering direct, indirect taxes and economy.

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CFO Series 2011 - Organised by Dun & Bradsheet, India

On 10th February, 2011, Dun & Bradsheet (DNB) invited me to give a speech on Managing Growth & Risk in the current economic scenario. The CFO series is a multicity conference across India (in the major metros) organiised by DNB in association with ANT trust. This is one of the easiest topic to speak in today's world, but very difficult to practice or implement.

The meeting started on time and Ms.Preeta (Head  - Learning Solutions) of DNB welcomed the gathering of CFO & Head of Finance. He introduced the speakers, as and when their turn came.
I was the first one to go and luckily I sent my presentation materials to the DNB team and they loaded the same, which made my job easy. Actually, I forgot to take the pen drive, which had the file.

I started the speech, as usual, with some pictures in my presentation material. I covered the following areas during my speech.
  • Where are we (India) in terms of the economy (Inflation, Interest rates, Forex reserve). The CFOs have to play in this ground and steer their companies in the growth path.
  • The current CFO's role, which is not confined to Finance and Accounts, but beyond that. A CFO should be a catalyst in an organisation. He should be a business person and get involved in key decisions.
  • The key drivers for growth - Strategy, Market Leader, Differentiators, Financial prudence, focusing on core business, careful when you diversify.
  • Challenges in managing the growth.
  • What are the possible risks? My punch line was "The biggest risk is not knowing the risk" Scott Adams cartoon came in handy for this topic.
I summed up the topics discussed with the key take-aways.

Mr. K R Girish (Partner – Tax and Regulatory Services and National Head – Litigation Practice, KPMG) presented the Tax reforms in India and covered the salient features of Direct Tax Code (DTC) & GST. Some of the DTC proposals were really scary, especially the GAAR & CFC. We need to wait and watch what is going to happen from 1-Apr-2012.

Mr. Itzik Amiel Attorney-at-law & Director International Business Development, ANT Group said, “India led, is leading and will lead the world for a new positive era of growth using its creativity, innovation and simplicity also in the financial and tax matters”.  His presentation on the tax benefits on being in Holland was really an eye-opener for me.

Mr. Narasimha Prasad, Zonal Manager – Employee Benefits, Metlife India Insurance Company Ltd said, “It is getting difficult for the common man to cope up with the rising prices hence there is a need for cautious macroeconomic policies to ensure that early action is taken in crucial areas. He presented the Employee Benefits offered by MetLife and solutions through Employee Benefits

Mr. Balusu Markandeswara. Chief Financial Officer, CARE Hospitals, presented the financial model for the healthiness industry and the expectations from the investor.

Though there was a panel session for the questions, the finance leaders asked the questions after each presentation.

The event ended with a note of thanks to the participants and the presenters. The lunch session was useful and helped the participants to network.

I forgot to take my camera and so no photos. If I get some photos from the organizers, I will publish the same.

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Economic Times - Running out of articles?

Today I am surprised to see the Economic Times carrying the same articles the successive days (3rd Feb 2011 & 4th Feb 2011). Are they running out of articles, as the words remain intact, the pictures have changed.

Today morning, when I read these pages, I thought I am reading yesterday's paper and checked the date. It is 4th Feb 2011. Then i checked yesterday's paper and found the same articles. I cant believe Economic times can do like this, with its popularity. I am a regular reader of Economic Times and I have not seen such things.

Here are the links:
Heard on the street (Page 12)

VIX retreating to 3-yr low is fastest-growing options bet (page 12)
3rd Feb article repeated on 4th Feb 2011

BHARTI - Co dials the right number with Africa ops  (Page 13)
3rd Feb article repeated on 4th Feb 2011 - (Ranjit Shinde)

Hope the editorial team has noticed it and see whether they come with some clarification.

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Seminar on Computing at Sri Malolan College, Mathuranthagam

Sri Malolan College of Arts and Science, established by Sri Ahobila Mutt organized a two-day seminar on “Recent Trends in Computing” with a view to offer an opportunity to the rural students of University of Madras and in particular the computer science students for interacting with the professional experts in this area and for acquiring an insight on the various recent trends.  About 100 students from various rural colleges and 30 faculties participated in this seminar.  It was inaugurated by Dr. N.Srinivasan, Director, Computer Centre, A.M.Jain College.  The key-note address was delivered by Mr. Sundar ram, Vice President, Oracle -Asia Pacific.  Mr. R. Sathya Narayanan, Oracle India spoke on “Enterprise Solutions – Past, Present and future” followed by a speech on “Wireless networks” by Prof. Narayanan. Mr. Kiran Nair, Sr Executive, Tally spoke on   Career opportunities for rural students in the accounting software.

Mr. R.Lakshmipathy, Vice-president, Accel Front Line inaugurated the second day of the seminar with a lecture on ‘Quality initiatives’. Dr. Jagannathan, Deputy Registrar, Sri Vinayaga Mission University spoke on “Evolution of trends in Computing over the years and the present scenario”, followed by a lecture on Modern Trends in  Computing by Mr. K.Venkatanarayanan, Senior Executive, Renault Nissan. The seminar included lecturers on cloud computing by Mr. S.Kailash of C-Dac Chennai. Students from various colleges presented papers on various recent trends. Events such as quiz, adzap collage etc was also conducted for the benefit of students.

“It is our endeavor to provide quality education to rural students and the seminar on Recent trends in computing is one such effort” said Mr.Santhana Gopalan, the Secretary.
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Mr.Ramadorai of TCS appointed as advisor to PM (for NSDC)

S. Ramadorai,Vice-Chairman Tata Consultancy Services, has been appointed advisor to the Prime Minister in the  Prime Minister’s National Skill Development Council in the rank of Cabinet Minister.

The Council, which is headed by the Prime Minister, seeks to develop a strategy for skill development at the national level along with variations at the state level and formulate strategies to address the skill deficit, said a press release.

“We are delighted that Ramadorai with his vast experience has been given this critical role of helping build skills and competency of India's growing workforce. He has always been very focused and committed about talent development and has been at the forefront of building the talent eco-system for the IT industry,” said N Chandrasekaran, CEO & MD, TCS. He added, “Ram's energy, passion and dedication will add great value to this national endeavor that holds the key to raising the growth rate of the country and meeting the aspirations of its citizens.”

S. Ramadorai said, “I am both delighted and humbled by the opportunity to be the Advisor to the Prime Minister in the National Skill Development Council. To reap the benefits of our demographic dividend, skill development for employability is a critical development task for the nation. Strengthening the links between Education- employable skills- jobs is imperative both from the perspective of a young working population as well as a competitive advantage for the country.” 

He added that like professional education, skills too must be made bankable. Technology must form an important part of the skill strategy not just to enhance quality of training but also to address challenges of scale, reach and cost of training. The country has a number of large scale initiatives underway that will provide the impetus for the next level of growth. It will be my endeavor to facilitate a unified nation-wide effort towards this critical Skill Development initiative.
Nandan was given a role to play in Government and now Ramadorai. Hope the the IT heads skill sets matches our politicians' expectation.

If one remember the last budget (in February 2010), it has approved 3 projects, worth about Rs.45 crores to create 10 lakh skilled manpower at the the rate of 1 lakh per annum, to the National Skill Development Corporation.

An extensive skill development programme in the textile and garment sector to be launched by leveraging the strength of existing institutions and instruments of theTextile Ministry to train 30 lakh persons over 5 years.
I see this as an action to show that they are going by the budget allocation, so that they can show this appointment and allocate further in the coming budget.
Let us see what is in store for allocating amount to the National Skill Development Corpn, in this budget.

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