Mumbai/New Delhi, March 1
Finance Minister P. Chidambaram today sought to allay investors' apprehensions on tax residency certificate issue saying India will not unilaterally revise the double taxation avoidance treaty with Mauritius.

"Unless we revise the treaty (with Mauritius), I don't think we should do anything unilaterally. Therefore, this clause was not intended to revise the treaty unilaterally, that is an ongoing discussion and that discussion will lead us to somewhere crucial," he said in TV interviews.

Equities moved up on Friday following a steep fall on Thursday after the finance ministry allayed FII concerns on tax residency certificates for claiming treaty benefits from countries like Mauritius.

"Since a concern has been expressed about the language of subsection (5) of Section 90 (of the Income Tax Act), this concern will be addressed suitably when the Finance Bill is taken up for consideration," the ministry said in a statement.

Concerns are being expressed that the provision regarding the TRC would make it difficult for investors routing their funds from low-tax countries like Mauritius, Cyprus and Singapore to avail the benefits of the Double Taxation Avoidance Agreement. The ministry said nothing new has been done with regards to TRC and the finance minister would clarify the government's position during debate on the Finance Bill.

Chidambaram, however, expressed concerns over misuse of the double taxation avoidance treaty by investors who route their investments through Mauritius to take advantage of the treaty.

New Delhi, March 1
With a focus on creating infrastructure, the outlay for telecom and information technology sectors has been hiked in the FY2014 budget presented on Thursday While the outlay for telecom has gone up by 47%, the IT & electronics department’s outlay has jumped 40%.

Finance Minister P. Chidambaram has also allocated Rs 532 crore for the IT modernization of post offices that are gearing up to offer core banking services.

A major part of the outlay in the telecom sector has been earmarked for rural telephony and for rolling out optical-fibre networks, which are the main highlights of the new telecom policy. In addition, Rs 2,180 crore has been earmarked for setting up the defence-cable project.

For the IT sector, the focus has been on creating a more robust network for cyber security given the increasing threat from hackers. There is also an increase in the outlay for a “national knowledge network” aimed at connecting top educational and research institutes across the country.

Presenting the budget, the Chidambaram said: “Post offices will become part of the core banking solution and offer real time banking services. I propose to provide Rs 532 crore for the project in 2013-14”. The total project cost approved by the government is Rs 4,909 crore.

Losing out to the private sector, the department of post has started deploying modern technology solution to develop core banking capability across post offices. As part of the upgrade, it has set target of March 31 to computerize all departmental post offices.

DoP has appointed Ernst and Young to prepare detailed project roadmap for setting up of Post Banks and the report is expected to be in place by April.

Chidambaram has also proposed setting up of technology incubators and linking them to the corporate social responsibility initiatives of a company.

Washington, D.C., March 1
The US government hurtled on Friday toward making deep spending cuts that threaten to hinder the nation's economic recovery, after Republicans and Democrats failed to agree on an alternative deficit-reduction plan.

Locked in during a bout of deficit-reduction fever in 2011, the time-released "automatic" cuts can only be halted by agreement between Republican lawmakers and the White House. That has proved elusive so far.

Both sides still hope the other will either be blamed by voters for the cuts or cave in before the worst effects — like air traffic chaos or furloughs for tens of thousands of federal employees — start to bite in the coming weeks.

Barring any breakthroughs in the next few hours, the cuts will begin to come into force at some time before midnight on Friday night. The full brunt of the belt tightening, known in Washington as "sequestration," will take effect over seven months so it is not clear if there will be an immediate disruption to public services.

President Barack Obama meets top leaders of Congress at the White House today to explore ways to avoid the unprecedented, across-the-board cuts totaling $85 billion. But expectations were low for a deal when the Democratic president huddles with Senate Majority Leader Harry Reid, Senate Republican leader Mitch McConnell, House of Representatives Speaker John Boehner, the top Republican, and House Democratic leader Nancy Pelosi.

Democrats insist tax increases be part of a solution to ending the automatic cuts, an idea Republicans reject.

"We should work together to reduce our deficit in a balanced way — by making smart spending cuts and closing special interest tax loopholes," Obama said Thursday.

Congress can stop the cuts at any time after they start on Friday if the parties agree to that. In the absence of any deal at all, the Pentagon will be forced to slice 13% of its budget between now and September 30. Most nondefense programs, from NASA space exploration to federally backed education and law enforcement, face a 9% cut.

The International Monetary Fund warns that the cutbacks could knock at least 0.5 percentage point off US economic growth this year and slow the global economy.

ITCHING FOR A FIGHT? Despite dire predictions that the budget cuts will jeopardize 750,000 jobs, rank-and-file Republicans and Democrats sounded as if they were itching for this fight to play out. — Reuters

Bangalore, March 1
Finance Minister P. Chidambaram’s budget proposal to treat funds provided to technology incubators as corporate social responsibility (CSR) expenditure has found favour with at least two new age industry bodies of India, besides MSME micro, small and medium enterprises) Minister K.H. Muniyappa.

Nasscom, the representative body of the IT and BPO industry, and the Indian Electronic and Semiconductor Association (IESA) have also welcomed the proposal.

“CSR contribution being made applicable to technology incubators in academic institutions will enable innovation. Incubation is at a tipping point in the country and a suitable policy environment can enable this to provide the right ecosystem for entrepreneurship in India. It is recommended that this incentive be extended to all incubators registered with DST/ MSME”, Nasscom said.

IESA, the premier trade body representing the Indian electronic system design and Manufacturing ESDM industry, said investments in technology incubators established in academic institutions being recognized as CSR would “kickstart the entrepreneurial ecosystem in India”.

Muniyappa also lauded the budget proposal and said incubators played an important role in monitoring new businesses which start as a small or medium business.

Nasscom, however, added that it was not happy with all the aspects of the budget proposals. Nasscom said it was disappointed that there was “no specific thrust on boosting high value exports” in the budget proposals.

Nasscom also expressed disappointment over “substantial increase in tax on royalty”. It,however, admitted that DTAA offered a cushion.

Nasscom said it was also disheartened by the exclusion of IT sector from the ambit of the investment allowance which had been extended to the investments related to plant and machinery. The IT lobby group also pointed out that no mention had been made in the budget on service tax related issues both pending and new rules. It further pointed out that there was still no clarity on retrospective levies.

Nasscom also objected to the levy of a 20% withholding tax on buyback of shares by unlisted companies.

The IESA criticized the higher excise duty on mobile phones above Rs 2,000. “This is a blow to domestic mobile handset makers, as excise duty on instruments priced above Rs 2,000 has been raised to 6% from the earlier rate of one per cent”.

The IESA, however, welcomed the import duty on settop boxes, describing them as “the fastest moving electronics products today”, proposed in the budget.