New Delhi, April 2: The government panel on services sector has proposed a new data protection law to check cyber crime. It has also suggested that the tax holiday under the software technology parks of India (STPI) scheme be continued beyond 2009.

According to the panel, a new law making the companies responsible for negligence in maintaining security on sensitive data or information should be inserted in the Information Technology Act, 2000.

Putting the onus of protecting data on companies processing it will have a positive effect in preventing violations.

At present, foreign companies outsourcing to India rely on contractual obligations and internal security measures set up by Indian BPO firms. While large outsourcing firms follow the security norms, smaller and mid-sized companies ignore the rules to reduce additional costs involved in setting up the security measures.

“If the tax holiday is withdrawn, STPIs will lose the level-playing field vis-a-vis special economic zones. Therefore, it is recommended that the government either withdraw the tax holiday for SEZs or continue the incentive for IT companies,” the report of the panel said.

STPIs enjoy direct tax exemption under Sections 10A and 10B of the Income Tax Act, 1961. The benefits are scheduled to expire on March 31, 2009. There are more than 8,000 units registered under STPIs in the country.