Budget 2015 must promote digital entrepreneurship in India

With Prime Minister Narendra Modi announcing his ambitious Digital India campaign, the Internet and Mobile Association of India (IAMAI) expects the upcoming Union Budget 2015 to promote digital entrepreneurship.

The association has recommended the government to announce policies that promote large Internet companies in the country. “Currently, there is no income-tax holiday available under the IT Act for digital companies. Incentive in the form of tax holiday would help the industry achieve its full potential by facilitating expansion, employment generation and entrepreneurship, just like in the case of telecom sector where a tax holiday was given for a period of ten years in a block of 15 years,” said IAMAI in its pre-budget recommendation.

It also added that Budget 2015 must focus on creating job opportunities in the sector. “Section 80JJAA of the IT Act, inter alia, provides that an Indian company operating an industrial undertaking shall be allowed a deduction of an amount equal to 30% of additional wages paid to the new regular workmen employed by the taxpayer during a year for three years, including the year in which such employment is provided. It is recommended that a deduction of an amount equal to 150% of salary paid to new employees be allowed to companies operating in the digital industry. Further, there should be no minimum employment threshold limits that should be set as a pre-condition for claiming the said incentive. The above incentive would go a long way in employment generation and fostering entrepreneurship in digital business,” the chamber added.

On the investment front, the association noted that credit availability has been a major challenge for new entrepreneurs in the sector; and hence, tax treatment must be given to investors in order to attract larger investments in the industry.

“eCommerce firms today are at a cross-road due to indirect tax issues, particularly from the state governments. IAMAI in its submission has requested the finance minister Arun Jaitley to address the anomaly and ensure for the smooth operation of market places. Also, the government should address issues related to VAT the practical difficulties of the eCommerce firms are duly consulted and considered. The current arbitrary demands on VAT and other local taxes by many states are acting as a deterrent to eCommerce sector,” stated the association.

It should be noted that the apex body of the digital companies in the country has also urged the government to come up with policies to promote more local languages in order to increase the Internet penetration in the country.