'TDS cut for BPOs to improve working capital availability'

NEW DELHI: The proposed reduction in TDS on payments to call centres to 2 per cent will help improve working capital available with BPO companies and potentially support expansion to tier II and III locations, industry body Nasscom today said.

In Budget 2017-18, it is proposed that section 194J is amended to reduce the rate of deduction of tax deducted at source (TDS) to two per cent from 10 per cent, in order to promote ease of doing business.

"In case of payments received or credited to a payee, being a person engaged only in the business of operation of call centre. This amendment will take effect from the 1st day of June, 2017," as per the Finance Bill 2017.

Nasscom said this is possibly the only IT sector-focussed announcement in the budget.

"This will improve working capital available with call centre companies and potentially support companies in their expansion to tier II and III locations," it added.

Gartner VP Partha Iyengar said this is a sign that the IT industry has become quite mature and does not need sops to continue its growth trend.

"In another sign of the fact that the IT industry has become quite mature and does not need sops to continue its growth trend (other factors like Trump notwithstanding), there were no overt steps taken - and none expected - for the industry, and there is no hue and cry about it. In a sense, it is a 'no-news is good-news' story for the sector from a Budget perspective," he said.

Tata Consultancy Services CEO-designate Rajesh Gopinathan said the Budget focuses on inclusion, transparency, fiscal responsibility and gives a big push to the digital economy.

"It encourages a shift to digital platforms with incentives to payers as well as merchants driving convenience, efficiency and transparency," he added.