The government of India has proposed a new code, Direct Tax Code (DTC) which may affect the Business Process Outsourcing (BPO) industry. According to the new code the BPO centres in India would be subjected to taxation, though there are some clarifications, especially on double taxation, were still needed, an expert said.

Tax expert and International Fiscal Association of India, Branch Chairman T P Oswal said that the tax exception given to BPOs has to be withdrawn under section 10(A) of Income Tax Act. There is no provision in DTC for any such extension of benefits.

He says that the BPOs can be taxed on the basis of the profit they make in India and also overall profit.

"According to the Organisation for Economic Co-operation and Development (OECD), a France-based grouping of 30 developed countries, these BPOs can be taxed on the basis of the overall profit of the company. But according to a ruling of the Supreme Court it is not possible," he said.

He also said that the BPOs can approach the Government under the Advanced Price Arrangement (APA) for any clarification about the taxation process to avoid any incident of double taxation.