• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 4/11/2014

India - Tax-exempt partner income; foreign investment in LLPs 

April 11: The KPMG member firm in India has prepared reports on the following developments (read the April 2014 reports by clicking on the hyperlinks provided below):
  • Partner’s share of profit is tax-exempt (even income is also exempt at partnership level) - A partner’s share of a partnership’s income is not subject to tax at the level of the partner. Some Indian tax assessing officers, however, have levied taxes on a partner’s share of profits when the partnership reported exempt income, claiming that the partner-level exemption is available only when the partnership has taxable income. India’s Central Board of Direct Taxes issued guidance to clarify this issue.

    Read an April 2014 report [PDF 434 KB]

  • Rules for foreign investments in LLPs - In 2011, India began to allow foreign investments in limited liability partnerships (LLPs) with prior approval of the Foreign Investment Promotion Board. However these changes were not incorporated as part of the Foreign Exchange Management Act, 1999, and this resultd in uncertainty among foreign investors as to whether they could set up LLPs in India for their business operations. The Reserve Bank of India recently amended its rules to incorporate the LLP provisions.

    Read an April 2014 report [PDF 441 KB]

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