Direct Tax Benefits For Export Of Computer Software

IT Companies in India have been getting Direct Tax benefits on the profits derived from export of computer software, under Sections 10A, 10AA & 10B of the Income -tax Act, 1961, subject to fulfillment of the prescribed conditions. However, due to different interpretations of law and lack of clarity on issues such as, whether "On-Site" Development of Computer Software qualifies as an Export Activity for Tax Benefits, Income from deputation of manpower for such on-site work would be allowed for tax benefits etc. at times lead to denial of Tax Benefits and consequently Tax Disputes were raised.

In order to resolve the aforesaid issues, the Government of India, had constituted a Committee known as the Rangachary Committee. The Rangachary Committee submitted its report on "Taxation of Development Centers and IT Sector" on 14th September, 2012, making recommendations on the following issues: