The Indian Finance Minister recently presented the Union Budget 2021-22 (Budget 2021) against the backdrop of a challenging economic environment due to COVID-19. In view of India’s tax reform measures to date, Budget 2021 maintains the same overall tax structure, but contains several measures that aim to attain tax certainty, facilitate tax administration, and reduce tax disputes. Multinational entities should analyze the impact of key Budget proposals on their operations, including a helpful provision to create a new board for advance rulings.
Ease of doing business remains a government priority. The Budget continues to encourage investments and contains plans for privatization of public sector undertakings and monetization of infrastructure assets.
This insight highlights key Budget 2021 tax proposals affecting foreign investors and multinational entities doing business in India. Budget proposals take effect once both houses of Parliament pass them and Presidential assent is accorded.
Budget 2021 proposals aim to boost India’s economic recovery through increased investments in public as well as private sectors, self-reliance through incentives across all business segments, and an improved ease of doing business.
The tax proposals present a stable approach, and focus on increasing tax certainty, attracting foreign investments, and improving tax administration in India.
Multinational entities should assess the impact of some of the key proposals such as the rationalization to the digital tax provisions and non-availability of depreciation on goodwill. The proposal to constitute a new Board for Advance Rulings is a welcome move and paves the way for speedy disposals of private ruling applications.