The Department of Telecommunications (DoT), in its budget recommendations, has sought investment-linked tax incentives for the telecom sector, especially for companies involved in rolling out telecom towers and manufacturing of network equipment.
DoT has stated that capital investments made for manufacturers of telecom equipment should be given incentives under the section 35AD of the Income Tax Act. Under this clause, investment-linked tax incentive is provided by way of allowing 100 per cent deduction in respect of any expenditure of capital nature incurred. Meanwhile, to support domestic manufacturing, DoT has urged the Finance Ministry to allow deferred payment of excise duty to domestic manufacturers of telecom equipment to ensure parity with importers.
DoT is of the view that as the telecom infrastructure service industry is highly capital intensive, the tax benefits will lower the cost of services offered by telecom infrastructure service providers and in turn reduce the cost of telecom services. Further, these incentives can help achieve economies of scale in the domestic manufacturing industry.
