The Centre, on Tuesday, announced extension of Software Technology Parks of India (STPI) scheme by another year, which was scheduled to end March 2009.

Introduced in 1999, Indian IT firms get tax holiday on profits from exports. The IT exemption for software companies has been extended to March 31, 2010, from next year, Finance Minister P Chidambaram said replying to a debate on his budget proposals in parliament here on Tuesday. It was time to remove exemptions and not to increase income tax rates, he added.

Move hailed

“This decision is particularly beneficial for BPO companies and small and medium segment, who have been greatly impacted by the rupee appreciation, inflation and signs of slowdown of US economy,” National Association of Software and Services Companies (Nasscom) said in a statement.

Nasscom said the benefit will also give it time to come up with other workable and acceptable options for the future, beyond 2010. “IT-BPO industry is expanding into tier two and three cities which will help remove the pressure on large centres and in more balanced economic development. It is important that we incentivate this move to tier two and three cities,” it added.