In its quest to make Special Economic Zone (SEZ) projects more investors friendly, the government has hiked the limit for transferring technical manpower from existing units to a new unit of SEZ and the move will go a long way to benefit the software industry. Under the new rules, it has now been decided that the new transfer or re-deployment of technical manpower from existing unit(s) to a new unit located in SEZ, in the first year of commencement of business, shall not be construed as splitting up or reconstruction of an existing business, provided the number of technical manpower so transferred as at the end of the financial year does not exceed 50 per cent of the total technical manpower actually engaged in development of software or IT enabled products in the new unit, official sources in the central board of direct taxes said, adding that prior to this, the limit was 20 per cent.
They added that if the player is able to prove that the net addition of the new technical manpower in all units of the said firm is at least equal to the number that represents 50 per cent of the total technical manpower of the new SEZ unit during previous year, deduction would not be denied. The board has recently revised the limit after receiving representations from the industry, which said that the 20 per cent limit was inadequate and restrictive since it impacts the competitiveness of Indian software industry in global market in terms of quality of product and delivery timelines. Commenting on the positive move, the software industry body Nasscom said the circular allows the flexibility to account for the total manpower at the enterprise as well as unit level, which is a great step to ease the technicalities involved in the process.