We hope you find the updates useful. Our India Desk at PwC Singapore in association with PwC India can advise you on such issues as well as other Indian fiscal/regulatory developments which may need to be considered to achieve overall tax efficiency and structuring of your investments into India.
If you have any queries regarding these updates and/or other tax or regulatory issues, we welcome you to contact us.
The Government of India has recently issued the Circular No 1 of 2011 (the “Circular”) to update the Foreign Direct Investment (FDI) policy. This is effective from 1 April 2011. Some of the key changes brought about by the Circular are listed below:
The Direct Taxes Code 2010 - Snapshot of major proposals
The Finance Minister of India tabled The Direct Taxes Code 2010 ("DTC") in Parliament for debate and discussion on 31 August. The DTC will be effective from 1 April 2012 and not from 1 April 2011, as had been intended earlier. This gives time to companies to understand the provisions, engage in a dialogue with the Government and, more importantly, restructure their operations as they switch over to taxation under the DTC. Also, this gives time to the Government to gear up its systems to accept and audit additional new compliance requirements imposed on the tax payers. A number of stringent proposals were brought in the original DTC introduced for debate in 2009. There were several areas of concern. Most of them such as asset based Minimum Alternative Tax ("MAT"), treaty override, etc. were addressed by the Finance Minister through the release of a Revised Discussion paper earlier this year. In substance, the new set of proposals is, by and large, in line with the provisions of current law with major changes on account of anti avoidance provisions and phasing out of profit linked exemptions. A number of areas are subject to detailed guidelines to be framed by Central Board of Direct Taxes ("CBDT") of the Government. We feel that for the critical areas such as GAAR etc, detailed guidelines should be framed upfront as a part of consultative process on DTC with the business community and not left to the CBDT (an administrative body of the Government) to be introduced after the DTC become the law.
Our team of specialists are analysing various aspects of the Bill introduced and will be sharing our insights through various platforms. Outlined below is a snapshot of the major proposals of the Bill that was tabled before Parliament.
The DTC 2010 will come into effect from the Indian financial year 2012-13, i.e. from 1 April 2012.
|0 - 200,000||Nil|
|200,001 - 500,000||10%|
|500,001 - 1,000,000||20%|
|1,000,000 and above||30%|
In the case of senior citizens Rs 200,000 may be read as Rs 250,000 and Rs 200,001 as Rs 250,001.
|Particulars||Income Tax Act, 1961||Original DTC||Revised DTC|
|Branch Profits Tax||-||15%||15%|
|MAT||19.93% on Book Profits||0.25% / 2% of Gross Assets||20% on Book Profits|
|Dividend Distribution Tax ("DDT")||16.61%||15%||15%|
|Wealth Tax||1% on Net Wealth exceeding Rs. 3mn||0.25% on Net Wealth exceeding Rs. 500mn||1% on Net Wealth exceeding Rs. 10mn|
Companies having a place of effective management in India at any time in the year will be considered as resident in India.
Income from Business
Mergers and acquisitions/business restructuring
Income from House Property
General Anti-Avoidance Rule ('GAAR')
Controlled Foreign Company ("CFC")
Return and Assessment
Tax Deduction at Source
Foreign Institutional Investors ("FII")
Venture Capital Funds ("VCF") / Venture Capital Company ("VCC")
Banking CompaniesThe deduction for amounts credited to provision for bad and doubtful debts account shall be restricted to 1% of aggregate average advances computed in the prescribed manner, subject to fulfilment of prescribed conditions.
As India continues on its growth path and attracts more foreign investments, it is essential for foreign investors to be aware of the latest developments in its tax and regulatory system. PwC Singapore's India desk continues to bring you relevant news and updates about doing business in India.
We are pleased to attach our latest news alert in relation to the mandatory requirement for furnishing the Permanent Account Number (PAN) in India. Effective 1 April 2010, any person including a non-resident, who will be receiving any income or payment from India, on which Indian tax is applicable, will need to comply with this requirement.
Our India Desk can assist you in obtaining a PAN and advise you on other Indian tax and regulatory developments which may need to be considered for structuring your investments or transactions in India.
As India forges ahead in attracting foreign direct investments, it is imperative for all foreign investors to be aware of the latest changes and developments in India's tax and regulatory system. Outlined below are some of the key developments:
1) External Commercial Borrowing policy partially modified
The External Commercial Borrowing (ECB) policy is regularly reviewed by the Government of India in consultation with the Reserve Bank of India (RBI) to keep it aligned with the evolving macro-economic situation, changing market conditions, sectoral requirements and the external sector. Pursuant to such review, the ECB policy has been partially modified.
2) Setting up of an office in India proposed to be streamlined
With a view to streamlining the setting up of a Branch Office and Liaison Office in India by foreign entities, the Reserve Bank of India (RBI) proposes to change the regime with effect from 1 July 2008.
3) Ruling by the Authority for Advanced Ruling
Enclosed is a recent Ruling by the Authority for Advanced Ruling on taxability of income arising sale of brand, trademark and brewing intellectual property by Foster's Australia Limited to SAB Miller in India.
As per the provisions of the Income-tax Act, 1961 [‘the ITA’], ‘business income’ and ‘capital gains’ are subject to tax at different rates of tax. The provisions of the ITA do not lay down clear criteria for determining the characterization of income, but certain generic principles have evolved out of the judicial precedents and administrative dispensation.
Earlier in 1989, certain tests were laid down by the Central Board of Direct Taxes [‘CBDT’] to distinguish between shares held as stock-in-trade and shares held as investment. The CBDT then issued draft supplementary instructions on May 16, 2006 to provide further guidelines for determining whether a person is a trader in stocks or an investor in stocks, and had included fifteen indicative criteria in this determination and had invited public comments thereon. The CBDT has now issued a Circular no. 4/2007 dated June 15, 2007 in this regard.
The Department of Economic Affairs attached to the Ministry of Finance (Government of India) has recently revised the guidelines for foreign investment in Indian Companies through the medium of preference shares. The revised guidelines are provided for your ready reference in the attached PricewaterhouseCoopers (PwC) Newsflash.