NRIs may regain tax sop

The Centre is re-looking at the tax status of non-resident Indians who have returned to India for good.

The United Progressive Alliance government is likely to re-introduce the nine-year period in which a returning NRI is classified as "a resident but not ordinary resident," said sources close to the development.

If the proposal is approved, returning NRIs will not have to disclose or pay tax on their global income till the ninth year of permanent residency in the country.

"The government is looking at a proposal to offer a minimum of 5 year grace years to NRIs and a maximum of 9 years," senior officials told Business Standard.

The previous BJP-led government had in the Union Budget for 2003-04 withdrawn the five-decade old benefit granted to RNORs when it reduced the cooling period from nine years to two years.

As a result of the changed norms, NRI deposits have fallen significantly, senior officials at PricewaterhouseCoopers said.

From April 1 this year, returning NRIs are liable to pay tax on their global income if their presence in the country qualifies them as residents for the previous two consecutive years.

The rule also is applicable to expatriates who come here for more than a two-year term. They would now have to declare their global income and pay tax on it, pointed out Anil Harish, advocate & tax consultant at D M Harish & Co.

"No one will come and settle in India unless the regulation is relaxed," said Ismail Hukkawala, president of the Indian Business & Professional Council that represents the interests of the 600,000 business community.

As an RNOR, the tax paper need only pay tax in India on income derived within the country, and not on his overseas income unless it is derived from a business set up or controlled in India. Earlier an NRI could avail of RNOR status for nine years after having been declared an NRI for a period of two years, said Harish.

India is the only country, which has created a special tax status for RNOR. This dates back to pre-Independence days when the British Raj found it difficult to send Britishers to work in India.

As a means to enticing them, the British created a class of "not ordinary residents," who for a period of nine years would not be liable to pay tax on their overseas income while in India.

The rule was continued after Independence where the benefit was extended to NRIs as many had settled overseas and were not keen to return fearing the high tax liability on their return.

NRIs and expatriates can take some reprieve from the double taxation avoidance agreement India has signed with a number of countries.

"While our counterparts in the US get the benefit under the double taxation avoidance agreement, people from Dubai do not since there is no question of paying tax in the UAE," pointed out Hukkawala.

World on your Mobile

Indian infotech companies are fast coming of age as dozens of young entrepreneurs display determination and unleash a range of world-class innovative products and services.

This is the story of one such entrepreneur, Neil Salvi, whose PACE Soft Silicon specializes in video software solutions for mobile devices.

rediff.com brings to you the second article in a special series on India's best innovators.

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Neil Salvi holds a small cellphone that seems quite ordinary. But as he presses a particular button on it, the phone displays a video footage of his son playing with a rabbit in the United States.

This is the latest MPEG4-based video SoftCorder in a Maxson handset, a new phone that enables consumers to take high-resolution videos clips.

You can also watch your favourite cricket or football matches or the latest Bollywood flicks on your cellphone, facilitated by software developed by PACE Soft Silicon.

PACE Soft Silicon, based in the United States, was established by Neil Salvi in June 2000 to deliver mobile video technology and multimedia solutions that fully utilise the capabilities of mobile application processors.

PACE Soft Silicon develops high value-added multimedia products, applications and architectures for packet-based wireless applications or mobile devices. Its patented applications and embedded algorithms are fully standards compliant, and designed for maximum performance at minimum complexity.

Today companies like Intel and Texas Instruments use camcorder software developed by PSS as 'the PACE solution unleashes the full power of the underlying silicon and delivers best performance for lowest battery consumption.'

Neil Salvi was born in Pune, but migrated to the United Kingdom with his parents. He, however, returned to India to set up a world-class engineering centre in Pune.

"I know Pune has always been in the forefront of excellence in education and I strongly believed that it offers plenty of opportunities for entrepreneurs as it abounds with fresh talents waiting to be tapped,'' he explains.

He believes that India offers plenty of opportunities for entrepreneurs. He was at his best explaining the growth of the company in the last four years, after an interesting presentation at the National Association of Software and Services Companies meet showcasing the best six companies in the western region.

The company was one of the top six selected from 36 companies in the western region. The best of the six will be given an opportunity to participate at the mega NASSCOM event in February. These companies will also be ensured venture capitalist support and regular mentoring.

Salvi's PACE Soft Silicon has been selected for the NASSCOM event to be a part of a bigger forum and showcase its hi-tech products.

Having good synergy between ideas and a sound knowledge of the subject helped him meet his goals. He did his masters in mathematics from Oxford and obtained an MBA from INSEAD. With an excellent educational background, like many other players in the small and medium enterprises (SME) sector, Salvi also started his career in the corporate world.

He worked with Accenture for ten years during which he was responsible for setting up the product development in Europe.

"While working on products, I realised that there was a huge market for multimedia technology. I decided to set up PSS to tap the potential of the 'optimised video solutions for mobile devices'."

When Salvi decided to establish engineering centre, Pune was the obvious choice.

"India also has a good pool of talented engineers. We have tied up with Indian Institute of Science and Indian Institute of Technology to recruit the best talent available at our centre," he says.

The Pune centre develops and delivers mobile video technology and multimedia solutions that fully utilise the capabilities of mobile application processors.

Today, the PACE software is used in mobile phones, camcorders, media players, videoconferencing platforms of many leading companies in the world.

Last year, the company's clocked a turnover of $1.5 million. But to reach this position, Salvi had to go through difficult times. "There were testing times, when the market was dormant. We had to really try hard to gain credibility," he says.

Today he has come a long way and learnt new lessons. From here, there is no looking back, he says. The company has major plans in the pipeline to diversify and develop to cater to the changing demands of its customers.

Today, it also has an elite list of clients -- Intel, Texas Instruments, Microsoft, Hewlett-Packard, Motorola, Tata Elxsi, ASUS, ADS and Pantech to name a few.

"Our latest Mpeg4-based video SoftCorder is a new class of application that enables consumers to take high quality videos clips with mass market devices which they then can easily and instantaneously share with friends and family using e-mail or MMS without having to worry about device compatibility."

"The combination of Maxon's GSM/GPRS technology and PACE's video software technology delivers market leading mobile multimedia capabilities to the consumer at a reasonable prices," adds Salvi.

The company's latest offering, SoftCorder, enables PDAs and smart phones to become camcorders. SoftCorder, developed by Pace, is a new class of application that enables consumers to take quality video clips with their phones which can be easily and instantaneously share with others.

Various applications like streaming audio and video, multimedia messaging, gaming, security, speech recognition and location-based services and mobile commerce becomes much easier with this innovative product.

Adding more value to customers' requirement has been the most important selling propositions of the company. "We believe the best way to add value to the customer's endeavours is to understand and solve our customer's toughest design challenges," says Salvi.

He has taken the product designed and developed in India to countries like Japan, Taiwan, Korea and the US. The 'Made in India' brand has won accolades from leading IT and mobile companies globally.

"The Indian market is not yet ready to accept high-end products. Cost is a factor which many people in India are not willing to come to terms with; but we are getting a good response from the Indian market for video phones which are competitively priced at $50 to $100 depending on the type of features," explains Salvi.

The research and development activities take a long time. The product lifecycle is at least 18 months. "We spend the initial two years in testing software to build innovative consumer-orientated software applications for a diverse range of products. The process of research and development is a continuous and tough phase," says Salvi.

Salvi was recently appointed convener of the WG7 multimedia technology focus group in Ireland. He is also an active member of the Mpeg4 rollout community worldwide.

"Money matters," he says, adding that "innovation is the key to successful business enterprises."

Fortunately the company received funding as the software they developed was well accepted. "The IT sector is bound to develop and the prospects are bright. But India has to build up its infrastructure," says Salvi.

With top handset manufacturers in Korea and Taiwan and in personal media players in North America using PACE software, the future holds much promise for Salvi.

Ambitious and raring to take up the challenges of the tough and competitive market, PACE is all set to become to become a clear market leader in developing software for mobile and media devices.

"Our turnover for the coming year is pegged at $2.5 million. Now from every quarter, we are planning to introduce newer and better models so we will have at least three new models every quarter," says an optimistic Salvi.

The future plans are on track with the company already in the process of extending its core technology into video on demand, wireless television and video conferencing.

Technology is on the move and Salvi has a definite lead in the field of mobile video technology.

How to Succeed ?

Two words that Doubting Thomases rarely use in the same sentence are 'India' and 'innovation.'

But that only indicates lack of awareness. Innovation, today, is the buzzword in the world of information technology. And India is very much in the race for recognition and reward, as dozens of young entrepreneurs display feisty determination and unleash a range of world-class innovative products and services.

The National Association of Software and Services Companies -- the apex body of IT firms in India -- recently paid tribute to the spirit of innovation shown by emerging companies in the Indian IT industry.

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When IITians -- that hallowed breed -- graduate, conventional wisdom has it that they either go abroad to pursue further studies and make pots of money, or they go into management courses so that they can -- you guessed it -- make pots of money.

So when Pradeep Chopra, Kapil Nakra and Purvesh Sharma, very middle-class boys studying at the Indian Institute of Technology-Delhi, decided they wanted to be entrepreneurs, the biggest hurdle was not ideas or funding, but family pressure that wanted to see them take up regular jobs and get 'settled.'

Yet, the trio -- all first generation entrepreneurs and sons of government servants -- braved the lesser-know road and came up with Whizlabs Software, an IT firm, and began tinkering with ideas and projects.

Whizlabs is an emerging company aiming to be a global player in providing eLearning solutions. Its focus is on IT certification exam preparation for individuals and IT skill assessment and enhancement for corporates.

Soon, success followed as their ideas found a market, so much so that NASSCOM selected them for its IT Innovation in India: Showcasing the Emerging Companies, an event held across Delhi, Mumbai and Bangalore.

For these young men, it was a chance to show the larger world their ticket to stardom: preparing online for IT certification exams.

Later, Chopra and Nakra (Sharma was not present) spoke to Amberish K Diwanji about becoming entrepreneurs and innovators.

Are all three of you co-founders from IIT?

Kapil: Yes, all three of us are from IIT-Delhi. In fact, we are not just batch mates but also hostel mates. All three of us were in the same hostel, same batch.

Pradeep: We are from the 1999 batch.

The trend among IITians is to go abroad or go to a management course? How come you guys chose a different path?

Pradeep: After I graduated from IIT, I joined TCS (Tata Consultancy Services) in Mumbai. I was there for 16 months. Then I got a job in a US-based firm and was waiting for my visa.

While waiting, I came to Delhi and we three just met. It was at this point that we saw something different.

As you said, our careers were taking the path most IITians take: either an IIM or a job or course that takes you abroad. But when we met, we decided that we want to do something different. So I chucked going abroad and we set up this firm.

But how did this idea come about?

Kapil: When I graduated, I joined a start-up that had about 10 people in India and the rest of the team in California. I did it for a year and then joined another Japanese start-up. So the idea of starting our own start-up soon became very appealing.

Also, a senior of ours had managed to build up a good value organisation. So we had a lot of inspiration to start our own company, the whole atmosphere was there.

But then as IITians, you must have been under tremendous pressure to get a regular job, go abroad, etc.

Pradeep: I guess in a way you are playing unfair with your parents also! We did exaggerate what all we could achieve to win over their support, we even had to tell them lies. I mean, for three months none of us drew a salary when we started our own company; and we had left a job where we were earning Rs 50k and now you are jobless, living on credit cards. I hid a lot of things, I had to hide facts from my family.

Kapil: Definitely, there was a lot of pressure from the family. We used to work entire nights but all the while hiding things. And the pressure was worse because all three of us are from very middle class families.

How did you cope with that pressure?

Pradeep: It was a difficult. I used to come back from office and continue working from my house. It is so ironic but when I was young, my parents would say you are playing too much and not studying enough, so now go and study. So even when I used to be playing, I'd keep an open book to pretend that I am studying.

But after we started our own company, the pressure was so hard, that we used to work all the time. So now, when my parents came to my room, I'd open a computer game to pretend that I was not working (laughs).

So finally when you succeed, how does it feel?

Kapil: We feel on the top of the world. You admire yourself for what has been achieved. It is the best that you can do and it is wonderful. It is not the revenue you earn or the value that you have attracted but the fact that you have created something that is sustaining itself, sustaining a team of 40 people.

The way we planned, the way we did it, the risks we took. Now we feel we can do anything, achieve anything.

Pradeep: It is a dream of doing something different that made us start this company, and when it does well, it just feels amazing.

Yet, when you started, you must have needed some money. How did you manage that seed capital?

Pradeep: When we started, we had a combined bank balance of Rs 50,000. That was the starting money. Then in three months, we took roughly $5,000 from friends and batch mates who were either working or studying abroad.

Why did they lend to you? Because they knew you or they trusted you? Or did they like whatever business plan or idea you had?

Pradeep: I guess they trusted us and also because they were our friends. At that time, even we were not sure of what we'd do but we were sure that we would do something.

Kapil: Money was not the real criterion. We were sure we were going to raise the money somehow or the other. We spoke to our friends in IIT and they knew we were chasing a dream and that they would help us.

In all the trouble you had raising money and the travails you faced, did you ever feel like chucking it all up? What kept you going?

Pradeep: One was the bond between all of us. There was also the future. We had a dream, but we knew we were going to achieve it. But the bond between us helped. Whenever one of us was depressed, the other two raised our spirits; when two of us were down, the remaining person raised our spirits.

Kapil: Of all the companies I have seen, I haven't seen a partnership of our kind. People keep talking of differences between partners but the way we have organised ourselves, we have meetings every week, we share our values with each other, including family issues so that our bond doesn't weaken.

In starting a company, what comes first: the company or the idea? And how does it progress?

Kapil: I don't think we really had any major idea but we were clear that whatever we do, it would be IT related. When we started our company, we tried a service-based model and for every service we made, and for every service we tried to make a product to improve the service but which was rejected.

But in the process, we kept improving the products we were making, and finally after four, five months, we decided to market a particular product to earn us extra revenue and this product became our main bread earner!

Pradeep: When we started, we knew nothing about what we'd do, but we were sure that we'll do something. We dreamt that in the next year or so, we'll be Infosys and had those kinds of fancy plans. And in three months, when we were really frustrated, we started with a small product, which has earned us $100,000 in three years.

That was the beginning. The first product took us 28 days to sell; the next product took us nine days, and that was how we soon became motivated. Our breakthroughs took us forward.

By the way, what are your fields of study?

Pradeep: I am from textiles, Kapil is from chemicals, and Purvesh is from computer science.

So from among you, when you stared, only Purvesh was clued in about computers and IT?

Kapil: But from us three, he knows the least about computers and IT! (He and Pradeep burst out laughing.)

Do you see more IITians becoming entrepreneurs?

Pradeep: Yes, the idea is much more predominant now.

Kapil: I have found that just from my batch, roughly five or six enterprises have started. That is teams of five or six. Then, there are a number of juniors who want to also emulate us. The trend has begun and people believe that you can go forward, that success is now possible.

Want to set up a successful IT firm? Work hard!

Indian infotech companies are fast coming of age as dozens of young entrepreneurs display determination and unleash a range of world-class innovative products and services.

Five-and-a-half years ago, Liqwid Krystal was started by two friends, Anand Adkoli and Ramana Gogula, both of whom had returned home from the United States. Now, Liqwid Krystal is one of six companies chosen by the National Association of Software and Services Companies (Nasscom) for the IT Innovation Award.

Now, Liqwid Krystal has only Anand, hands-on, as CEO, while Ramana is Chairman of Liqwid Krystal's board. "The words really stand for liquid crystal, but are just spelt differently, as we could not get that particular domain name," explains Ramana.

"Why this name? Because we wanted the company to be fluid, like liquid, and able to take on any shape, but also sparkling, and disseminate knowledge, like crystal disseminates light. The unusual launch too was because of Ramana's other identity, and Anand even features in Ramana's first music video Aye Laila.

Both Anand and Ramana are first generation entrepreneurs. Anand's father was a forest officer while Ramana's father was an academician.

"I always had a lot of ideas, and decided to start trying to productise them finally," says Anand, talking about the origin of the company.

Says Ramana, "I just got tired of working for someone else all the time."

Before LK, Ramana was Managing Director (South East Asian operations) of the American MNC Sybase Inc. He had also successfully implemented projects and set up sales offices for Sybase in North America, South America, Europe, and South East Asia.

"I was with Oracle Corporation in Redwood Shores, CA for about nine years before starting LK," explains Anand now. "I have been in software development, customer support and applications development groups within Oracle. I joined them when they were small and grew into middle management quite rapidly. I quit this 'plum' job because it got routine and the travelling got to me. There is very little wiggle room for innovation and free ideation in large companies. Processes are rigid, approval cycles are part of the culture and I felt that I had spent too much time in my first and only company. So I decided to try my hand at being an entrepreneur. Of course, that was 1999 at the height of the IT boom and I had no idea that things would be so difficult!"

What exactly was Anand's great idea, and the product that came out of it? "I started writing technology books on Oracle Technology with Osborne/McGraw Hill," he says. "All my books have code samples in them as they are technology books. These are little pieces or snippets of code that are used to either illustrate or teach a reader on 'how to do something'."

"Unfortunately, in order for the reader to actually experience or try the code sample, they have to spend many hours acquiring and installing the software necessary to try out that piece of code. This can be highly time consuming and expensive."

"I realised that it is enough for a beginner to just experience the code without worrying about the details of how the code worked, why it worked, what software or development environment was used. I decided to design a product that would enable someone to try out that code sample in 5 seconds at the click of a button. The idea for our premier product CodeSaw came from that. Our product now allows a user to compile and run programs across 19 different programming languages at a click of a button with no installation of software. All a user needs is access to the Internet."

"Once we got the idea whetted by publishers, we took our story to venture capitalists," continues Anand. "The very first venture capitalist we talked to (Global Technology Ventures) funded us $2 million after a 15 minute meeting because they loved the idea and believed in the team." <>

"Our company was born after we got the money. The office, our first employees, et cetera were hired later. So we got funded in July 1999 and LK was born in October 1999. Being a product company, it took us over two years to complete the product, and we got our first revenues in the third year. We sold our product to the very publishers who had vetted our idea and prototype earlier. So, the largest technology book publishers Addison-Wesley and O'Reilly are our customers today."

Guess what LK's proposed business areas were, back then, when they started out? Development of networking technology products, education and consulting, offshore development and, believe it or not, production of new world music for global audiences!

Just how did the partners hope to reconcile subjects as diverse as IT and music? "Since it is my own company, I decided that it is time I finally did just what I wanted to," Ramana had told rediff.com at that time. "Companies are in diverse interests. Look at Wipro, which started out making oil and is now doing IT. Maybe the separate divisions of my company will shortly become independent companies too."

Sadly, this never happened. LK took five long years to start doing well. Four years after it began, when things began to look really hairy for the company, Ramana opted out of his hands-on role to pursue a career in film music. "The idea of integrating music and IT was abandoned as Ramana was the domain expert and he is not here to drive it," says Anand now.

Anand's other passions are writing, promoting the cause of poor Indian children and the management of wildlife in and around urban areas.

What does it take to become a successful entrepreneur in the IT industry today, post the dot-com bust? "Something as mundane as many, many hours of work," says Anand ruefully. "I am going to say about 25 per cent of the success depends on your knowledge, 25 per cent on execution, and 50 per cent on marketing and sales. My experience as an author and software engineer made it easier for me to find the gap in the market."

He reiterates there is no easy alternative route. "We Indians tend to always try and find short-cuts in everything we do," he admits ruefully. "Besides, we are told repeatedly that it is very bad to fail. So we are very careful and restrained in all that we do. This approach will not work. Unless you can think on your feet and take risks I don't think it is possible to be an entrepreneur."

Where does Anand say LK going? "I think LK will continue to grow till we reach mid-size, say about $100 million revenue, and then we will hopefully get acquired by a larger player," he says optimistically.

"After a point, it is very difficult to market a product out of India in the global market. It is possible to get to being mid-sized but beyond that requires global clout which can come only from outside India currently."

As for the IT industry itself, Anand firmly believes that in India, it will only grow around IT services and IT-enabled services. "Even though some companies are putting in some effort into innovation and all that, it will be at least 8 to 10 years before we emerge as a product player," he says. "For now, we will continue to take the low hanging fruit that is IT services. After all, we only have about 3 per cent of the world market in IT services today."

As for the Internet and e-commerce space, he says, "People -- investors, entrepreneurs and employees -- will not make the same mistakes that they made in the last boom. The last boom had too much speculation and hype and people lost their way; almost like the Gold Rush of 1949! This time around, people will think through the issues and the industry will rebound and actually deliver the promises it made 3 to 4 years back."

7 Tips to Successful Marketing

Tip #1 Always Include These 3 Elements in Your Marketing Messages

Element 1: Powerful Headline

Use the headline to grab your customers' attention and let them know what you can do for them. State the biggest benefits up front. Focus on benefits of your products and services, not the features.

Element 2: Compeling Call to Action

Your desired result is to motivate your ideal client to act immediately to engage you directly or indirectly and generate a prospect by getting their contact information. A limited time offer can often move the skeptic and procrastinator from prospect to customer. If there is only a short time to take advantage of a special opportunity, you will enjoy more response.

Element 3: Multiple Contacts Method

Offer a choice between e-mail, telephone, web site, fax, etc, so your prospect can choose what is most comfortable to them.

Tip #2 Be Focused

Don't try to be everything to everyone. Be something to someone. Just as customers screen you, you should decide who you want to serve. Most businesses will get 80% of their sales from 20% of their customers. Know exactly who those 20% are and aim your advertising to that segment.

Tip #3 Ways to Boost Your Response Rates

Dramatically increase your odds for a direct mail response by including a self-addressed, stamped or postage paid envelope. Advertisements bearing a toll-free 1800-phone number are usually noticed by 20% more people than those lacking one. As a rule, at least twice as many people will respond to an 1800 number in an advertisement, rather than calling a regular phone number.

Tip #4 Create a Unique Sales Preposition

What looks good to you is not necessarily so for your desired audience. Do market research and test your strategies on your target market. To successfully market a product or service, you must first position your company in relation to the competition. Decide whether you want to be known for low bargain prices, unlimited selection, top of the line customer service, or the highest quality of merchandise.

Tip #5 Show Excellent Customer Service

Word of mouth is the least expensive, yet most effective way to get new business. It costs nothing and is the most believable of all. This is therefore a positive reason for sustaining excellent customer service and relations. If your customers are thrilled by the service you give, they'll tell their friends.

Tip #6 Take Some Risks

A believable guarantee makes it safe for potential customers to give you a try. Very few people will exploit a generous guarantee compared to the extra business it generates. Can you guarantee the results of your advertising? Are you willing to commit to a money-back guarantee?

Tip #7 Follow Up, Follow Up and Follow Up Again

Having invested all the time and effort, maximise the benefits you have reaped. People need to build trust with you. Always contact your leads within 24 hours of receiving them. Chances are if you contact them a week or two later, they will have moved on. Use a combination of mail, email, telephone and personal visits as your follow-up strategy. At each opportunity provide your potential clients with value. 80% of sales are made after five or more contacts. Yet a typical business person gives up after just one or two follow up contacts. These elements will make all the difference in the world between struggling to get clients and becoming wildly successfully in marketing your services. They are worth investing your best efforts and getting the support you need to implement them effectively.