New Delhi: Government today (Feb 3, 2004) exempted foreign companies from imposition of tax in case the outsourced services were ancillary and auxiliary in nature and adequate remuneration was paid to the Indian call centre.

"It has been clarified that if outsourced services are ancillary and auxiliary in nature and adequate remuneration is paid to the Indian call centre, then there shall be no tax on such foreign company as has outsourced its activity to India," Finance Minister Jaswant Singh said while presenting the Interim Budget for 2004-05.

This policy is on the lines of OECD norms and double taxation avoidance agreements, he said.

He said Business Process Outsourcing (BPO) has scope for employment generation.