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Bharat Kumar

CHENNAI, Aug. 7

THE wheel has turned a full circle. Long years of tax exemptions for the software industry have caused many a debate and heartburn.

Now, those against such exemptions may feel their hearts warm up as they look at figures - especially for the top three. Tax charges for software companies have climbed this quarter. Their tax charges as a percentage of sales have also increased. Which means, as revenues increase, tax charges have increased more than proportionately.

Significantly, this is the first quarter when new tax rules from the last Budget announcement take effect. The Budget surprised the software industry when 10 per cent of software exports became eligible for taxation.

Says Mr Bhupinder Ahuja, an analyst with Deutsche Securities in India, " The benefits of Section 80HHE are already being withdrawn ." He adds that some companies have started seeing a turnaround for their international operations. In such cases, taxes to be paid in those countries could have increased the overall tax burden.

Infosys Technologies, Wipro Ltd and Satyam Computers are the top three in the industry that have shown an increase in revenues and a more than proportionate increase in tax charges.

Asked if tax charges for international operations increased this quarter for Infosys, Mr Mohandas Pai, Chief Financial Officer, Infosys Technologies, said, "No. The tax increase could be attributed to only 90 per cent of income under Section 10A and 10B being exempt from tax for this year", instead of the earlier 100 per cent exemption.

Commenting on Wipro's figures, a spokesperson said that tax on dividends this fiscal had also contributed to the increased tax burden. "In addition to taxes on 10 per cent of software exports, tax on our dividend income from mutual funds made the burden heavier", he said.

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