Budget 2023: Wish List For Enabling IT Sector’s Contribution to India’s 5 Trillion USD GDP Goal
Mukundhan Sreenivasan, CFO, Fulcrum Digital Inc writes to SMEStreet and emphasised on key expectations from Union Budget 2023-24
At a recent event organized by FICCI, Hon’ble Union Minister Shri Nitin Gadkari said that India is the fastest growing major economy in the world, and is set to achieve a GDP of 5 trillion USD by FY 2024-25.
This is an ambitious target, but a realistic one given the strong and consistent growth in the Indian economy even in the face of global headwinds. And with the rapid pace of digital transformation and adoption of emerging technology, the IT sector is poised to play a pivotal role in helping the country achieve this objective.
With this in mind, industry leaders are eagerly awaiting the forthcoming Union Budget for FY 2023-24 for any developments that will beneficial to the IT sector. Here are a few areas where changes would be welcome:
Special Economic Zones (SEZ)
Over the last two decades, SEZ’s have played a key role in India’s rapid economic development – promoting exports, encouraging domestic & foreign investment, facilitating infrastructure development, driving job creation, and more. Technology companies too have benefited tremendously from SEZ’s. However, there are a few changes in SEZ rules that can be made which would help the sector better take advantage of these benefits.
Smoother processes for the movement of goods between two SEZ units would be a great aid to firms. Scrapping old computers and laptops, after paying the residual duties in the open market, would be another welcome move.
Last year, the government introduced a comprehensive set of rules and regulations governing work-from-home for SEZ employees. Simplifying the permissions process for remote working would be very helpful for firms based in SEZ’s.
Corporate Social Responsibility (CSR)
The government recently made a few amendments to the CSR rules – mandating that companies need to comply with CSR-related obligations as long as there is any unspent amount in their CSR accounts, as well as raising the limits for expenditure on impact assessment that could be counted towards a company’s total CSR expenditure.
But there are a few additional steps which can be taken, as part of the Budget, to make compliance with CSR provisions less onerous for companies.
Firstly, it would be appreciated if there is a relaxation in the mandatory spends on CSR activities for firms with a Rs. 5 Crore net profit, by increasing the threshold to firms with a net profit of Rs. 50 Crores.
Secondly, while calculating net profits, the remuneration paid to professional employee directors should not be added back.
These moves would certainly ease some of the burden on MSME’s in particular.
Personal Income Tax
There are a lot of expectations from this Budget in terms of personal income tax, from adjustments to the income tax slabs, hiking standard deduction, increasing 80C exemption etc. Tax experts are predicting that there will be some tax reductions in order to increase disposal income and stimulate spending in the economy.
From a business point of view, it would be highly beneficial if the Budget revises the existing personal income tax thresholds. Moreover, in order to simplify tax compliance, the numerous tax exemptions can be done away with. This can be accomplished by considering an alternate method of tax computation – without exemptions, but with lower rates and higher basic exemption limits.
Changes in SEZ procedures, relaxations in CSR mandates, and revisions in personal income tax limits are just a few of the measures that the upcoming Union Budget can take to ease compliance and some financial burden for IT firms. This will enable the sector to redouble their efforts towards helping India leapfrog towards and eventually cross the 5 trillion USD GDP finish line.