India Budget 2020 expands digital tax, eliminates double taxation of certain dividends

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March 2020

Overview

The Indian Finance Minister presented the Union Budget 2020 (Budget) of the Modi government 2.0 on February 1.  According to the legislative process, the Budget 2020 proposals would take effect after the Budget passes both houses of Parliament and obtains Presidential assent.

Both houses of the Indian Parliament passed the Budget, and it obtained Presidential assent on March 27.  It will become law effective April 1, 2020.  This insight highlights some key changes made to the Budget (over the original proposals).  Changes were proposed to the original proposals when the Lower House of the Indian Parliament adopted the 2020 Finance Bill on March 23.

The takeaway

The elimination of the double taxation of dividends and extension of the credit mechanism to foreign dividends provides much needed clarity.  The expansion of the scope of equalization levy to nonresident e-commerce operators is a rather unexpected move.  E-commerce companies now should assess the tax impact and undertake compliance obligations.

See also

On April 3 (12:00pm EDT; 9:30pm India time), PwC India is hosting a webcast on implications of the recent amendments to the Budget and legislation on tax dispute settlement. Please join us for India’s 2020 Budget: Amendments to the Finance Bill 2020.

In addition to the Budget, described above, the government also enacted the Direct Tax Vivad se Vishwas Act, 2020, on March 17, providing an avenue for taxpayers to settle disputes by paying taxes that have been demanded of them, however eschewing payment of any interest or penalty.  This scheme is a significant step to clear the backlog of direct tax litigation in India.  The Indian government has extended the beneficial provisions of the scheme from March 31, 2020 to June 30, 2020.

Webcast speakers:

·     Bernard Moens, Global International Tax Services Leader, PwC LLP, New York 

·     Frank D'Souza, Chartered Accountant 

·     Sriram Ramaswamy, Partner and India Desk Leader, PwC LLP, New York  

·     Pavan Kakade, Corporate and International Tax Partner, PwC India

Contact us

Doug McHoney

International Tax Services Leader, PwC US

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