India removes tax on outsourcing by overseas companies

Tuesday, 03 February 2004, 20:30 IST
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NEW DELHI: The Indian government Tuesday said it would remove a contentious tax imposed on the business process outsourcing (BPO) units of multinational companies to boost the sector. Presenting a vote-on-account, or interim financial budget, for 2004-05, Finance Minister Jaswant Singh said the government would impose no tax on foreign companies outsourcing to India. Earlier last month, the Central Board of Direct Taxation had issued a notice exempting "incidental services" outsourced by foreign companies to India but not "core activities" from taxation. The National Association of Software and Service Companies (Nasscom) had warned that the move to tax core services of captive BPO units of multinationals would drive them away from India to other tax friendly countries. ` India's vast English-speaking employees, coupled with its educational system and training programmes, have helped transform the country into a global outsourcing superpower. The rapidly growing IT industry has virtually turned the country into an electronic housekeeper to the world, taking care of a host of routine activities for multinational giants. According to Nasscom, India's money-spinning BPO segment would grow by 54 percent in 2004, clocking $3.6 billion in revenues.
Source: IANS
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