DIT To Enable Growth Of SME Sector

The department of information technology (DIT) recently recommended a slew of measures, including fiscal incentives, for growth and development of SMEs. According to the DIT, Small and medium enterprises (SMEs) may soon become investment hot spots in the IT segment.

To encourage SMEs to create their own products, the DIT suggested tax depreciation and credits for investments made to develop intellectual property (IP) for SMEs. The department adds that the IP developed by SMEs in particular will be encouraged in government related projects, such as the e-governance initiative.

In a move to boost growth of SMEs, the DIT is offering tax benefits to companies with a turnover of over Rs. 100 crore. These tax benefits are available on costs incurred for goods and services procured from domestic SMEs on a subcontract model.

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

For further growth in the SME sector, it has been suggested that tax deductions of up to 20% of income will be provided to all IT-ITeS professionals working with SME companies for a minimum period of two years.

With a view to popularize seed funding in SME start-ups, the DIT recommends setting up of a fund insuring a percentage of the seed-funder’s investment.

To facilitate industrial or market application of research, the department adds that fiscal incentives in the form of a set-off against taxable income will be given to individuals investing in start-ups providing commercial output for work done by research institutions.