4,000 software firms rush to STPI

The phase-out proposal is applicable to all software firms that register after April 1. Under this proposal, India’s booming software firms would pay 20 per cent of the potential tax rate on their export earnings during the year ending March 31, 2001.

The tax would increase by 20 percentage points every subsequent year until export earnings were taxed at the full rate. Mahajan said some software firms had complained the one-month period was not enough to register as exporters because of the amount of paperwork involved.

"So we have suggested to the finance ministry that instead of taking March 31 as the last date, let us have a cut-off year of tax holiday," Mahajan said. He said that this deadline could be the year 2009 and until then all software firms could be exempt from taxes on export earnings.

But chances Mahajan’s suggestion would be accepted might be slim as the Finance Minister has thus far refused to roll back any of his proposals, concerned that could lead to more such demands in the midst of an alarming fiscal situation.

Mahajan also said the information technology (IT) bill to enable electronic commerce was likely to come into effect in June with parliament passing it during its month-long session starting April 17.

The IT bill, paving the way for electronic commerce, digital signatures and prevention of cyber crimes, was introduced in Parliament last year. The legislation proposes to amend existing laws such as the Indian Evidence Act 1872, Indian Penal Code 1860, Reserve Bank of India Act and Banker’s Evidence Act.