Saturday, June 07, 2008

Outsourcing: Is India Losing Its Competitive Edge?

Source : Click

Act, which its president approved on May 10, will greatly impact U.S. tech companies with outsourced operations in the country. For instance, an increase in excise tax is included in the Act, and the short-term capital gain rate has been increased from 10 percent to 15 percent.

India has historically been regarded as a favorable country to outsource skilled services such as manufacturing, IT, programming, research and development, distribution and call centers. The declining strength of the dollar, rising wages and bottlenecks in urban infrastructure no doubt will aggravate existing outsourcing Latest News about Outsourcing arrangements. However, another factor is starting to cause U.S. technology companies to rethink their strategies for outsourcing skilled services to India: taxation.

Over the past several years, India has been enacting and enforcing new, more aggressive tax laws and enforcing them. Among the areas of taxation attracting significant attention from the India Department of Revenue are inter-company transfer pricing, income tax treaties and permanent establishment. In addition, the new 2008 Finance Act, which received approval from the president of India on May 10, also contains new laws that will impact U.S. technology companies with operations in India.