Budget 2007: Alok Mittal, Executive Director, Canaan Partners

Highlights of the Budget for Venture Capital and IT:

There is a Pass-through status for Venture Capital (VC) investments in research in new chemical entities, dairy, poultry, bio-fuels, biotech, IT, nanotechnology.

Minimum Alternate Tax (MAT) has been extended to IT companies; IT companies to pay 11.22% of adjusted book profits. The E-governance allocation is to be increased from Rs.395 to Rs.719 crore. This will enable greater efficiencies in government administration, improved citizen-government interaction and a positive multiplier effect on the pace of IT adoption in the country.

Regarding ITI’s, another 300 ITI’s are expected to be covered by August 2009. Interest free loan of up to Rs 2.5cr for upgradation of ITI’s. ITI’s encouraged to start a second shift.

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Rs. 33 crore to be invested in manpower development for the software export industry.

Recommendations:

The government actions should include lowering costs for the end user by rationalizing taxes that impact IT services, software and hardware domestically and put in place policies that encourage investment. Extension of the tax holiday for the IT sector is a critical aspect to creating a sound IT infrastructure in the country. Tax rebates for individuals investing in computers and subscribing to broadband access in rural areas would provide sufficient incentive for creating rural entrepreneurs to run and manage such kiosks. This would ultimately help in taking the benefits of IT to rural areas and usher in IT-led development.