Strong Digital Infra, Skilling Support for AI, Cybersecurity Among IT Sector Budget Expectations Industry leaders anticipate incentives for adopting emerging technologies like AI, quantum computing, and blockchain, alongside tax relief for R&D investments.

By Ayushman Baruah

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As Finance Minsiter Nirmala Nirmala Sitharaman is set to present the Union Budget 2025 on February 1, the IT sector's pre-budget expectations are centered on policies that drive innovation, growth, and job creation. The industry is expecting favourable policies that spur the adoption of emerging technologies like artificial intelligence (AI).

"Industry leaders anticipate incentives for adopting emerging technologies like AI, quantum computing, and blockchain, alongside tax relief for R&D investments. Strengthened support for skilling programs, particularly in AI and cybersecurity, is crucial to bridging talent gaps. Expanding digital infrastructure, promoting startups, and incentivizing global delivery models could position India as a tech innovation hub. The sector also seeks clarity on data privacy regulations and tax structures, ensuring ease of business and competitiveness. A tech-forward budget could catalyze the sector's role in economic growth," said Neeti Sharma, CEO, TeamLease Digital.

"As part of strengthening India's digital infrastructure, Sharma said the industry is expecting tax concessions for the data center sector. "Given the critical role data centers play in enabling digital services and advancing the 'Digital India' vision, such incentives will not only attract foreign investments but also generate employment and fuel a new growth trajectory for the sector."

The upcoming Union Budget holds the potential to propel India into the forefront of logistics technology by supporting the integration of emerging technologies like AI, IoT, robotics, automation, and 5G, said Pali Tripathi, CEO of Taabi Mobility.

"At Taabi.ai, we believe that strategic investments in these technologies will revolutionize the logistics ecosystem, making it more efficient, sustainable, and globally competitive. To achieve this, we urge the government to prioritize the development of a National Technology Strategy for Logistics, enabling the seamless integration of cutting-edge technologies into the sector," said Tripathi.

"A key focus should be on building technology-driven infrastructure, including smart logistics parks, IoT-enabled transport systems, and advanced port and highway technologies. This will not only improve operational efficiency but also reduce the carbon footprint of logistics operations, contributing to the nation's sustainability goals," added Tripathi.

Consulting firm Deloitte has also recognized the need for tax concessions for data centers. "Considering the critical role played by data centres in enabling digital services and also in supporting the 'Digital India' vision of the government, certain tax breaks for this industry may be considered—for instance, a tax holiday for a certain number of years or a concessional tax rate of 15 percent (akin to the concession provided under Section 115BAB to the manufacturing sector until 2024). Similar incentives provided to the software sector in the past significantly boosted investments and created large-scale employment opportunities. Tax concessions for the data center industry will open the gates for foreign investments, boost employment in India and pave a new growth trajectory," Deloitte said in a pre-budget note.

Deloitte seeks clarity on taxation of software revenues of non-resident software sellers. "Taxability of software revenues of non-resident sellers has been subject to litigation. Tax authorities have held that such revenue is royalty and thereby taxable in India. However, non-resident software sellers have asserted that software revenues are business income as they merely provide a limited user right without access to the source code. Hence, such
revenue should not be taxable in India in the absence of a Permanent Establishment (PE)…the government must consider clarifying this issue to end continued litigation on the taxability of nonresident software sellers," Deloitte said.

Ayushman Baruah

Entrepreneur Staff

Regional Bureau Head

Ayushman Baruah is the Regional Bureau Head at Entrepreneur India. With over 15 years of experience in technology journalism, Ayushman writes on the intersection of business and technology. He takes special interest in areas like the artificial intelligence (AI) and global capability centres (GCCs). He is also the recipient of the 15th Annual PoleStar Awards in jury's category for excellence in technology journalism.     
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