Noting that the India-US bilateral tax treaty has not been

updated in 20 years, USIBC argued making necessary changes could significantly improve the current tax climate through modernised provisions that reflect the reality of the economic relationship between the US and India. To facilitate cross-border trade and investment without the barrier of double taxation, India and US should reaffirm the shared commitment to improve tax dispute resolution. In its memorandum, USIBC requests the Finance Minister to amend the Finance Bill to reduce the withholding tax on software revenues to allow the segment of the market subject to withholding to resume. To eliminate double taxation faced by software and service companies, India should resolve the duplicate taxation of software as a service for service tax purposes and as a good for excise tax purposes. In addition to asking the Finance Minister to continue the Software Technology Parks (STP) Initiative, which expired in 2011, USIBC has suggested granting a complete income tax holiday to STP units (on lines similar to SEZ), including a 15 year tax holiday without a sunset clause, exemption from DDT and MAT, and; relaxing the terms and conditions applicable for setting up captive IT/ITES SEZs. Further to make investments in Indian equity markets more appealing to US investors, especially in light of the recent Qualified Foreign Investor Framework, USIBC recommend that the India-US Double Taxation Avoidance Agreement be amended to eliminate this capital gain tax to US investors. This tax treatment would also apply to investors in mutual funds that are investing in Indian equity investments, it said.