Nasscom sees 1 bn VCF inflows

BANGALORE, AUG 20: India is likely to see close to a 1 billion of investments and venture capital funds flowing in from Japan within the ...

BANGALORE, AUG 20: India is likely to see close to a 1 billion of investments and venture capital funds flowing in from Japan within the next two years, the National Association of Software and Service Companies Nasscom president, Dewang Mehta, said.

quot;India8217;s software exports to Japan was estimated to touch 300 million this fiscal, almost double of last year8217;s 160 million. The figure is likely to hit the 1 billion mark by 2003,quot; Mehta said.

Following the visit of Japan8217;s prime minister, Yoshiro Mori, to India between August 21 and 25, Nasscom has charted out its plans to take up certain issues in Indo-Japan software trade. The focus of the visit would envisage more opportunities for Indo-Japan alliances in the IT sector and Japanese businesses were keen to follow the model of competitive advantage derived by the US business community through outsourcing software work to India, he said. The interaction is also looking at resolving some of the procedural obstacles in establishing Indo-Japan alliances including the removal of withholding-tax related to the definition of the term Fees for Technical Services8217; under the Double Taxation Avoidance Treaty DTAT between India and Japan. quot;While the India-Japan software business is now on a good take-off stage, there is an issue with regard to the deduction of a 20 per cent withholding tax by Japanese authorities on payments made to Indian software companies for supply of customised software solutions,quot;Mehta said, adding: quot;While the problem was mostly with on-site services, offshore development in certain cases were also not being spared.quot;

According to Nasscom, the withholding tax is not applicable to Indian software companies that provide software development services either through off-shore or on-site services as it amounts to sale of customised products or solutions with proprietary rights.

quot;Such considerations received do not fall under the category of the fees for technical services8217; treaty and, moreover, in the case of off-shore software development, there should not be even an iota of doubt,quot; Mehta said. A case in point is a similar treaty signed between India and USA wherein US tax authorities do not deduct tax at source for similar customised software development services. The agenda will also include discussions on allowing Indian software professionals travelling to Japan to get multiple entry visas to enable timely travel and attend to project specifications, maintenance and support services.