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The government has decided that telecom companies offering 3G services will not be allowed to claim tax benefits under Section 80 IA of the Income Tax Act.

March 15, 2010
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The government has decided that telecom companies offering 3G services will not be allowed to claim tax benefits under Section 80 IA of the Income Tax Act. Under this act, existing operators are allowed to choose a block for 10 years to avail of tax benefits. In the first five years, they are entitled to 100 per cent exemption on taxable profit, while for the remaining five years they receive a 30 per cent exemption. The government has decided against extending the benefits to 3G players, since the proposed auctions will only allocate spectrum and not provide a new licence. Moreover, Section 80 IA is currently available only to operators who commenced service before 2005.

The move is likely to impact the new entrants and foreign players since the existing operators will continue to receive benefits on their 2G infrastructure.

 
 
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