SMEs To Become Investment Hotspots

by CXOtoday Staff    Jan 09, 2007

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

To encourage SMEs to create own products, the department of information technology has suggested tax depreciation and credits for investments made to develop intellectual property (IP) for SMEs. The department adds that IPs developed by SMEs in particular will be encouraged in e-governance projects.

In a move to boost growth of SMEs, the department of information technology has recommended that companies with a turnover of over Rs. 100 crore will be offered tax benefits on costs incurred for goods and services procured from domestic SMEs on a subcontract model.

To 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 popularise seed funding in SME start-ups, the department of information technology 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.