Description
This is a PPT explaining changes proposed in direct tax code in detail.
Direct Taxes Code 2009 Radhakishan Rawal
PwC
Backdrop
• Current law – Income-tax Act, 1961 • Almost five decades old • Over 5000 amendments • New Code in the making for four years
PricewaterhouseCoopers
Slide 2
Stated objectives
• Simplicity • Minimising litigation • Widening the tax base • Eliminating exemptions
PricewaterhouseCoopers
Slide 3
Topics
• Certain specific issues for real estate sector • Corporate and Personal Tax • Taxation of LLPs • Personal Tax • GAAR • Wealth Tax • International tax
PricewaterhouseCoopers
Slide 4
Certain specific issues for real estate sector
Minimum Alternative Tax (MAT)
• Payable on „value of gross assets? and not on „book profits? • Tax Rate
- Banking companies – 0.25% - Other companies – 2%
• No credit allowed in subsequent years
• Multiple level taxation – holding-subsidiary structures
• Levy of MAT @ 2% on “gross assets”; could apply even during construction
phase - No credit for MAT paid; sunk cost that will reduce IRRs
PricewaterhouseCoopers
Slide 6
Commercial Projects
- Lease rentals characterized as House Property income – could result in higher tax outflow for investee companies - Taxable rent to be higher of contractual rent and presumptive rent
- Presumptive Rent - deemed to be 6% of construction cost if rateable value not available - Lump sum deduction reduced from 30% to 20%
PricewaterhouseCoopers
Slide 7
Residential projects
- Revenues from pre sales – Taxable on receipt basis? - Withholding on sale of flats / commercial units? - Deduction for interest in case of self-occupied properties withdrawn
- Exemption on rollover from one house property to another withdrawn
PricewaterhouseCoopers
Slide 8
SEZ projects
- MAT and DDT exemption for SEZ Developers withdrawn - Profit based incentive sought to be replaced with investment based incentive scheme - No incentive for SEZ units
PricewaterhouseCoopers
Slide 9
Real estate investors
• Venture Capital Funds - Pass thru status - Complications under the current law post amendment to section 10(23FB) removed • GAAR provisions - Use of various financial instruments such as convertibles etc. to meet the requirements of the investors and the developers
PricewaterhouseCoopers
Slide 10
Corporate and personal taxation
Taxation of resident companies
Corporate tax Dividend Distribution Tax MAT Capital gains tax
Existing (%)* 30 15 15 varying
Proposed (%)* 25 15 2 / 0.25 on assets 25
* Surcharge and cess as per the relevant Finance Act
PricewaterhouseCoopers Slide 12
Business Income…
• Income from separate businesses to be computed separately • Income from businesses eligible for incentives to be computed
separately
PricewaterhouseCoopers
Slide 13
…Business Income…
• Sweeping amendments to the scope of taxable profits
- any amount receivable from or in connection with business included • Taxable profits to now include: - Relief in respect of any liability in the nature of loan, deposit, etc - Amount receivable on cessation / termination of any business agreement • Profit on sale of business capital assets or on slump sale - taxed as business income and not capital gains
PricewaterhouseCoopers
Slide 14
…Business Income…
• Deductions allowable only under three classes:
- Operating expenditure; - Permitted Finance Charges; and - Capital Allowances • Losses incidental to business – selectively covered
PricewaterhouseCoopers
Slide 15
Deferred revenue expenditure
• Specific Deferred Revenue Expenditure eligible for capital
allowance Block of Assets Depreciation Rate (%) Non-compete fees 25 Premium on obtaining assets on lease / rent 25 VRS expenditure 25 Business re-organisation expenditure 25 Expenditure on prospecting mineral or 15 development of mine / other natural deposit of any mineral
PricewaterhouseCoopers Slide 16
Capital Allowances
• Broadly similar to depreciation and similar allowances
• 150% weighted deduction for in-house scientific R&D
expenditure; extended to all industries
• Loss upon sale of entire block of assets to be ignored
- Depreciation on block to continue
PricewaterhouseCoopers
Slide 17
Minimum Alternative Tax („MAT?)
• Payable on „value of gross assets? and not on „book profits? • Tax Rate
- Banking companies – 0.25% - Other companies – 2%
• No credit allowed in subsequent years • Multiple level taxation – holding-subsidiary structures
PricewaterhouseCoopers
Slide 18
Dividend Distribution Tax
• DDT extended to all “dividends” • Dividend distributed to specified pass-through entities exempt
from DDT
• DDT exemption for SEZ developers discontinued
PricewaterhouseCoopers
Slide 19
Capital Gains…
• Distinction between long-term and short-term gains removed
• Capital gains taxable at normal rates • Gains on transfer of business capital assets taxable as
business income
• Other capital assets referred to as „Investment Assets? • Securities Transaction Tax proposed to be abolished
PricewaterhouseCoopers
Slide 20
…Capital Gains
• Indexation available only for assets held for one full financial
year
• Indexation benefit now available for bonds and debentures
• Indexation benefit now available to non-residents
- Adjustment for exchange fluctuation no longer available
• Substitution of cost by fair market value
- Base date shifted from 1.4.1981 to 1.4.2000
• Cost of acquisition of asset deemed to be “nil” if not
determinable
PricewaterhouseCoopers
Slide 21
Tax incentives…
• Profit-based tax incentives sought to be discontinued • Expenditure / Investment-based incentive scheme introduced • Infrastructure Projects including development of Special
Economic Zones (“SEZ”) under new scheme
• Export-based Incentives such as for units in Software
Technology Parks or SEZs to be discontinued
• Selective grandfathering
PricewaterhouseCoopers
Slide 22
…Tax incentives
• Eligible businesses entitled to following additional deductions:
- Expenditure on purchase, lease or rental of land or land rights
- Capital expenditure on most assets - Expenditure incurred before commencement of business
• Each eligible business to be treated as separate business
PricewaterhouseCoopers
Slide 23
Grandfathering of existing incentives
• Following incentives continued under the Code: - Sec 80-IA – Profits from Infrastructure business - Sec 80-IAB – Profits earned by SEZ developer - Sec 80-IB – Profits from various businesses covered therein - Sec 80-IC – Profits from undertakings in the North-East - Sec 80-ID – Profits from business of hotels / convention centres in specified areas - Sec 80-IE – Profits from undertakings in the North-East - Sec 80JJA – Profits from business of collecting and processing biodegradable waste • No specific provisions for grandfathering of SEZ units eligible
for tax holiday under section 10AA
PricewaterhouseCoopers Slide 24
Carry forward of losses
• No distinction between long term and short term capital losses
• Loss of a specified business / special source allowable only
against subsequent years? profits of the same business / source
• Losses allowed to be carried forward indefinitely • Entire losses including previous years? losses lapse if return not
filed by due date
PricewaterhouseCoopers
Slide 25
Set-off and carry forward of losses
Business loss, loss from house property or ‘residuary’ losses
Income from employment, house property, Business income, residuary income, incl. capital gains
Capital Loss
Capital gains
Losses from a Special Source
Income from the same Special Source
• Set-off in same or subsequent years • Discussion paper talks of ring-fencing losses from speculative business -
no corresponding provisions in Code
PricewaterhouseCoopers Slide 26
Taxation of LLPs
Taxation of LLPs
• LLPs, Partnership Firms and AoP / BoI treated as “unincorporated bodies”
and taxed as separate entities
• Applicable tax rate 30% (no MAT, no tax on cash distributions) • Partner?s share not taxed in his hands • In case of change in constitution because of retirement, death etc., losses to
the extent of the share of the retiring / deceased partner cannot be carried forward
• Salaries, bonuses, commissions to working partners and interest to all
partners fully deductible
PricewaterhouseCoopers
Slide 28
Personal Taxation
Tax rates for an individuals
Existing Income Slab (INR) Up to 1,60,000 1,60,001 to 3,00,000 3,00,001 to 5,00,000 Above 5,00,000
Tax Rate* Nil 10% 20% 30%
Proposed Income Slab (INR) Up to 1,60,000 1,60,001 to 10,00,000 10,00,001 to 25,00,000 Above 25,00,000
Tax Rate Nil 10% 20% 30%
*Currently education cess is levied at 3% of the tax amount.
PricewaterhouseCoopers
Slide 30
Deductions for savings
• Restricted to maximum of Rs. 300,000 per year • Amount deposited in accounts with permitted intermediaries
• Withdrawals not taxable if rolled over into another account
• Withdrawals from such accounts taxable
PricewaterhouseCoopers
Slide 31
Taxation of savings
EXISTING
Taxability of Qualifying Investments at present
PROPOSED
Taxability of Qualifying Investments as per Code
On Investment
Accretion
On withdrawal
On Investment
Accretion
On withdrawal
Exempt upto Rs. 100,000
Exempt
Exempt
Exempt upto Rs. 300,000
Exempt
Taxable may result in double taxation
PricewaterhouseCoopers
Slide 32
Roll-over provisions for capital gains…
• Roll-over available for re-investment of sale proceeds • Roll-over available only to individuals/HUFs
• Investment to be made in new asset within
- one year before or - three years from the end of the financial year in which transfer took place • If new asset not acquired before the end of the financial year - Sale proceeds to be deposited in Capital Gains Deposit Scheme
PricewaterhouseCoopers
Slide 33
…Roll-over provisions for capital gains
• Qualifying new assets
- Agricultural land – in case of gain on transfer of agricultural land - Residential house – in case of gain on transfer of any asset - Deposit in Capital Gains Saving Scheme (CGSS) – in case of gain on transfer of any asset • Any withdrawal from CGSS is liable to tax under the head income from residuary sources in the year of withdrawal
PricewaterhouseCoopers
Slide 34
Tax Deduction at Source
• TDS on payments for purchase of goods?
• No ability to seek lower rate of TDS?
• No time limit for completion of TDS assessment
- Time limits were recently introduced
PricewaterhouseCoopers
Slide 35
General AntiAvoidance Rules („GAAR?)
General Anti-Avoidance Rules…
• Empowers the Commissioner of Income-tax („CIT?) to declare an arrangement impermissible
- if the arrangement has been entered with the objective of obtaining tax benefit and, inter alia, lacks commercial substance or misuses the provisions of the Code • The CIT may amend, disregard or re-characterise the arrangement
• Onus on the tax payer to demonstrate that obtaining tax benefit was not the main purpose of the arrangement • Applicable to residents as well as non-residents
PricewaterhouseCoopers Slide 37
…General Anti-Avoidance Rules
• GAAR provisions are highly subjective • Sweeping powers to tax department • Whether tax planning permissible
PricewaterhouseCoopers
Slide 38
Wealth Tax
Wealth Tax
• Individuals, HUFs and Private Discretionary Trusts liable to • •
•
•
wealth tax Wealth tax abolished for companies Rate of wealth tax reduced from 1% to 0.25% Exemption limit enhanced from Rs. 30 Lakhs to Rs. 50 Crores One house or plot of land acquired or constructed before April 1, 2000 exempt
PricewaterhouseCoopers
Slide 40
International tax
Key changes in a nutshell
Positive Lower tax rates but, 2% MAT Introduction of APA and safe harbour rules Indefinite carry forward of business and capital losses Negative Circumstantial
Introduction of sweeping Changes in capital gains General Anti Avoidance Rules legislation Treaty override provisions Increase in withholding tax rates Residence status of foreign companies
MAT
Similar issues for Indian subsidiaries of foreign companies
Treaty override
• For “determining the relationship between … a treaty and this code … the provision which is later in point of time shall prevail” • Principle of beneficial interpretation between the domestic law and tax treaty no longer applicable? • Furnishing of tax residency certificate mandatory for claiming benefits under the applicable tax treaty • GAAR to override applicable tax treaties?
80 existing tax treaties overridden? – Long-standing principle of beneficial choice overturned?
Slide 43
Overview of tax rates
Existing (%) Corporate tax Branch Profits Tax Capital gains tax Royalty/Fees for Technical Services (“FTS”)
* Surcharge and cess as per the relevant Finance Act
Proposed (%)* 25 15 30 20
40 Various 10.56
Slide 44
Overview of branch profits tax
• Branch profits tax (15%) introduced on branches of foreign companies • Illustration INR Branch profits in India 100 Less : Corporate tax at 25% 25 Net profits after corporate tax 75 Less : Branch profits tax at 15% 11.25 Net profits after branch profit tax 63.75 Effective tax rate – 36.25%
Slide 45
Change in residency test for foreign companies
Provision Current Foreign companies resident in India only if controlled and managed wholly in India during the year Threshold lowered to wholly or partly managed and controlled from India at any time during the year Implication Non-India income not liable to tax in India
Proposed
Non-India income exposed to Indian tax
Intent to hit subsidiaries of Indian MNCs? Result: (unintended?) adverse consequences for certain foreign companies
Slide 46
Thank you.
Radhakishan Rawal
Associate Director, PwC
[email protected] Tel : 022 6689 1110
© 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).
PwC
doc_711224810.ppt
This is a PPT explaining changes proposed in direct tax code in detail.
Direct Taxes Code 2009 Radhakishan Rawal
PwC
Backdrop
• Current law – Income-tax Act, 1961 • Almost five decades old • Over 5000 amendments • New Code in the making for four years
PricewaterhouseCoopers
Slide 2
Stated objectives
• Simplicity • Minimising litigation • Widening the tax base • Eliminating exemptions
PricewaterhouseCoopers
Slide 3
Topics
• Certain specific issues for real estate sector • Corporate and Personal Tax • Taxation of LLPs • Personal Tax • GAAR • Wealth Tax • International tax
PricewaterhouseCoopers
Slide 4
Certain specific issues for real estate sector
Minimum Alternative Tax (MAT)
• Payable on „value of gross assets? and not on „book profits? • Tax Rate
- Banking companies – 0.25% - Other companies – 2%
• No credit allowed in subsequent years
• Multiple level taxation – holding-subsidiary structures
• Levy of MAT @ 2% on “gross assets”; could apply even during construction
phase - No credit for MAT paid; sunk cost that will reduce IRRs
PricewaterhouseCoopers
Slide 6
Commercial Projects
- Lease rentals characterized as House Property income – could result in higher tax outflow for investee companies - Taxable rent to be higher of contractual rent and presumptive rent
- Presumptive Rent - deemed to be 6% of construction cost if rateable value not available - Lump sum deduction reduced from 30% to 20%
PricewaterhouseCoopers
Slide 7
Residential projects
- Revenues from pre sales – Taxable on receipt basis? - Withholding on sale of flats / commercial units? - Deduction for interest in case of self-occupied properties withdrawn
- Exemption on rollover from one house property to another withdrawn
PricewaterhouseCoopers
Slide 8
SEZ projects
- MAT and DDT exemption for SEZ Developers withdrawn - Profit based incentive sought to be replaced with investment based incentive scheme - No incentive for SEZ units
PricewaterhouseCoopers
Slide 9
Real estate investors
• Venture Capital Funds - Pass thru status - Complications under the current law post amendment to section 10(23FB) removed • GAAR provisions - Use of various financial instruments such as convertibles etc. to meet the requirements of the investors and the developers
PricewaterhouseCoopers
Slide 10
Corporate and personal taxation
Taxation of resident companies
Corporate tax Dividend Distribution Tax MAT Capital gains tax
Existing (%)* 30 15 15 varying
Proposed (%)* 25 15 2 / 0.25 on assets 25
* Surcharge and cess as per the relevant Finance Act
PricewaterhouseCoopers Slide 12
Business Income…
• Income from separate businesses to be computed separately • Income from businesses eligible for incentives to be computed
separately
PricewaterhouseCoopers
Slide 13
…Business Income…
• Sweeping amendments to the scope of taxable profits
- any amount receivable from or in connection with business included • Taxable profits to now include: - Relief in respect of any liability in the nature of loan, deposit, etc - Amount receivable on cessation / termination of any business agreement • Profit on sale of business capital assets or on slump sale - taxed as business income and not capital gains
PricewaterhouseCoopers
Slide 14
…Business Income…
• Deductions allowable only under three classes:
- Operating expenditure; - Permitted Finance Charges; and - Capital Allowances • Losses incidental to business – selectively covered
PricewaterhouseCoopers
Slide 15
Deferred revenue expenditure
• Specific Deferred Revenue Expenditure eligible for capital
allowance Block of Assets Depreciation Rate (%) Non-compete fees 25 Premium on obtaining assets on lease / rent 25 VRS expenditure 25 Business re-organisation expenditure 25 Expenditure on prospecting mineral or 15 development of mine / other natural deposit of any mineral
PricewaterhouseCoopers Slide 16
Capital Allowances
• Broadly similar to depreciation and similar allowances
• 150% weighted deduction for in-house scientific R&D
expenditure; extended to all industries
• Loss upon sale of entire block of assets to be ignored
- Depreciation on block to continue
PricewaterhouseCoopers
Slide 17
Minimum Alternative Tax („MAT?)
• Payable on „value of gross assets? and not on „book profits? • Tax Rate
- Banking companies – 0.25% - Other companies – 2%
• No credit allowed in subsequent years • Multiple level taxation – holding-subsidiary structures
PricewaterhouseCoopers
Slide 18
Dividend Distribution Tax
• DDT extended to all “dividends” • Dividend distributed to specified pass-through entities exempt
from DDT
• DDT exemption for SEZ developers discontinued
PricewaterhouseCoopers
Slide 19
Capital Gains…
• Distinction between long-term and short-term gains removed
• Capital gains taxable at normal rates • Gains on transfer of business capital assets taxable as
business income
• Other capital assets referred to as „Investment Assets? • Securities Transaction Tax proposed to be abolished
PricewaterhouseCoopers
Slide 20
…Capital Gains
• Indexation available only for assets held for one full financial
year
• Indexation benefit now available for bonds and debentures
• Indexation benefit now available to non-residents
- Adjustment for exchange fluctuation no longer available
• Substitution of cost by fair market value
- Base date shifted from 1.4.1981 to 1.4.2000
• Cost of acquisition of asset deemed to be “nil” if not
determinable
PricewaterhouseCoopers
Slide 21
Tax incentives…
• Profit-based tax incentives sought to be discontinued • Expenditure / Investment-based incentive scheme introduced • Infrastructure Projects including development of Special
Economic Zones (“SEZ”) under new scheme
• Export-based Incentives such as for units in Software
Technology Parks or SEZs to be discontinued
• Selective grandfathering
PricewaterhouseCoopers
Slide 22
…Tax incentives
• Eligible businesses entitled to following additional deductions:
- Expenditure on purchase, lease or rental of land or land rights
- Capital expenditure on most assets - Expenditure incurred before commencement of business
• Each eligible business to be treated as separate business
PricewaterhouseCoopers
Slide 23
Grandfathering of existing incentives
• Following incentives continued under the Code: - Sec 80-IA – Profits from Infrastructure business - Sec 80-IAB – Profits earned by SEZ developer - Sec 80-IB – Profits from various businesses covered therein - Sec 80-IC – Profits from undertakings in the North-East - Sec 80-ID – Profits from business of hotels / convention centres in specified areas - Sec 80-IE – Profits from undertakings in the North-East - Sec 80JJA – Profits from business of collecting and processing biodegradable waste • No specific provisions for grandfathering of SEZ units eligible
for tax holiday under section 10AA
PricewaterhouseCoopers Slide 24
Carry forward of losses
• No distinction between long term and short term capital losses
• Loss of a specified business / special source allowable only
against subsequent years? profits of the same business / source
• Losses allowed to be carried forward indefinitely • Entire losses including previous years? losses lapse if return not
filed by due date
PricewaterhouseCoopers
Slide 25
Set-off and carry forward of losses
Business loss, loss from house property or ‘residuary’ losses
Income from employment, house property, Business income, residuary income, incl. capital gains
Capital Loss
Capital gains
Losses from a Special Source
Income from the same Special Source
• Set-off in same or subsequent years • Discussion paper talks of ring-fencing losses from speculative business -
no corresponding provisions in Code
PricewaterhouseCoopers Slide 26
Taxation of LLPs
Taxation of LLPs
• LLPs, Partnership Firms and AoP / BoI treated as “unincorporated bodies”
and taxed as separate entities
• Applicable tax rate 30% (no MAT, no tax on cash distributions) • Partner?s share not taxed in his hands • In case of change in constitution because of retirement, death etc., losses to
the extent of the share of the retiring / deceased partner cannot be carried forward
• Salaries, bonuses, commissions to working partners and interest to all
partners fully deductible
PricewaterhouseCoopers
Slide 28
Personal Taxation
Tax rates for an individuals
Existing Income Slab (INR) Up to 1,60,000 1,60,001 to 3,00,000 3,00,001 to 5,00,000 Above 5,00,000
Tax Rate* Nil 10% 20% 30%
Proposed Income Slab (INR) Up to 1,60,000 1,60,001 to 10,00,000 10,00,001 to 25,00,000 Above 25,00,000
Tax Rate Nil 10% 20% 30%
*Currently education cess is levied at 3% of the tax amount.
PricewaterhouseCoopers
Slide 30
Deductions for savings
• Restricted to maximum of Rs. 300,000 per year • Amount deposited in accounts with permitted intermediaries
• Withdrawals not taxable if rolled over into another account
• Withdrawals from such accounts taxable
PricewaterhouseCoopers
Slide 31
Taxation of savings
EXISTING
Taxability of Qualifying Investments at present
PROPOSED
Taxability of Qualifying Investments as per Code
On Investment
Accretion
On withdrawal
On Investment
Accretion
On withdrawal
Exempt upto Rs. 100,000
Exempt
Exempt
Exempt upto Rs. 300,000
Exempt
Taxable may result in double taxation
PricewaterhouseCoopers
Slide 32
Roll-over provisions for capital gains…
• Roll-over available for re-investment of sale proceeds • Roll-over available only to individuals/HUFs
• Investment to be made in new asset within
- one year before or - three years from the end of the financial year in which transfer took place • If new asset not acquired before the end of the financial year - Sale proceeds to be deposited in Capital Gains Deposit Scheme
PricewaterhouseCoopers
Slide 33
…Roll-over provisions for capital gains
• Qualifying new assets
- Agricultural land – in case of gain on transfer of agricultural land - Residential house – in case of gain on transfer of any asset - Deposit in Capital Gains Saving Scheme (CGSS) – in case of gain on transfer of any asset • Any withdrawal from CGSS is liable to tax under the head income from residuary sources in the year of withdrawal
PricewaterhouseCoopers
Slide 34
Tax Deduction at Source
• TDS on payments for purchase of goods?
• No ability to seek lower rate of TDS?
• No time limit for completion of TDS assessment
- Time limits were recently introduced
PricewaterhouseCoopers
Slide 35
General AntiAvoidance Rules („GAAR?)
General Anti-Avoidance Rules…
• Empowers the Commissioner of Income-tax („CIT?) to declare an arrangement impermissible
- if the arrangement has been entered with the objective of obtaining tax benefit and, inter alia, lacks commercial substance or misuses the provisions of the Code • The CIT may amend, disregard or re-characterise the arrangement
• Onus on the tax payer to demonstrate that obtaining tax benefit was not the main purpose of the arrangement • Applicable to residents as well as non-residents
PricewaterhouseCoopers Slide 37
…General Anti-Avoidance Rules
• GAAR provisions are highly subjective • Sweeping powers to tax department • Whether tax planning permissible
PricewaterhouseCoopers
Slide 38
Wealth Tax
Wealth Tax
• Individuals, HUFs and Private Discretionary Trusts liable to • •
•
•
wealth tax Wealth tax abolished for companies Rate of wealth tax reduced from 1% to 0.25% Exemption limit enhanced from Rs. 30 Lakhs to Rs. 50 Crores One house or plot of land acquired or constructed before April 1, 2000 exempt
PricewaterhouseCoopers
Slide 40
International tax
Key changes in a nutshell
Positive Lower tax rates but, 2% MAT Introduction of APA and safe harbour rules Indefinite carry forward of business and capital losses Negative Circumstantial
Introduction of sweeping Changes in capital gains General Anti Avoidance Rules legislation Treaty override provisions Increase in withholding tax rates Residence status of foreign companies
MAT
Similar issues for Indian subsidiaries of foreign companies
Treaty override
• For “determining the relationship between … a treaty and this code … the provision which is later in point of time shall prevail” • Principle of beneficial interpretation between the domestic law and tax treaty no longer applicable? • Furnishing of tax residency certificate mandatory for claiming benefits under the applicable tax treaty • GAAR to override applicable tax treaties?
80 existing tax treaties overridden? – Long-standing principle of beneficial choice overturned?
Slide 43
Overview of tax rates
Existing (%) Corporate tax Branch Profits Tax Capital gains tax Royalty/Fees for Technical Services (“FTS”)
* Surcharge and cess as per the relevant Finance Act
Proposed (%)* 25 15 30 20
40 Various 10.56
Slide 44
Overview of branch profits tax
• Branch profits tax (15%) introduced on branches of foreign companies • Illustration INR Branch profits in India 100 Less : Corporate tax at 25% 25 Net profits after corporate tax 75 Less : Branch profits tax at 15% 11.25 Net profits after branch profit tax 63.75 Effective tax rate – 36.25%
Slide 45
Change in residency test for foreign companies
Provision Current Foreign companies resident in India only if controlled and managed wholly in India during the year Threshold lowered to wholly or partly managed and controlled from India at any time during the year Implication Non-India income not liable to tax in India
Proposed
Non-India income exposed to Indian tax
Intent to hit subsidiaries of Indian MNCs? Result: (unintended?) adverse consequences for certain foreign companies
Slide 46
Thank you.
Radhakishan Rawal
Associate Director, PwC
[email protected] Tel : 022 6689 1110
© 2009 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).
PwC
doc_711224810.ppt