India

Direct Taxes Code 

 

Direct Taxes Code-2010

 

The Government introduced the Direct Taxes Code 2010 (DTC) in the Parliament on 30 August 2010. The DTC is proposed to be made effective from the financial year beginning from 1 April 2012.

 

While some onerous provisions from the first draft of the DTC have been rightly dropped after representations, several proposals in the DTC are still likely to compel the corporates to rethink their existing structures and mode of conducting business. For example, the DTC proposes to tax transfer of shares of a foreign company, on the basis that there is a transfer of a capital asset situate in India, if the fair value of the assets situated in India constitute at least 50 percent of the assets directly or indirectly held by the foreign company.

 

Further, an overseas company with a place of effective management in India will now be treated as a tax resident in India and would be consequently liable to tax in India on its global income. Introduction of CFC rules would result in taxing income of certain overseas subsidiaries in the hands of their Indian owners, even before such income is distributed.

 

The other important provisions that have been retained and refined relates to GAAR, APA, CFC regulations, residency rule for the foreign company and branch profit tax. Another key relaxation relates to tax holidays for the SEZ developers and SEZ units. The other welcome move is the continuation of exemption of capital gain on sale of listed shares and concessional tax treatment for short term capital gain as well as unlisted shares.

 

India Inc. has long advocated its preference for a modern, stable and simple tax regime. Whether the DTC meets these criteria is something that will be undoubtedly debated as one analyses the fine print. However, it is the tax administration's implementation that will determine the long-term impact of the new tax regime.

 

 

Please click here to view our Webcast presentation on Direct Taxes Code 2010. (PDF 586 KB)

 

Please click here to view our Analysis on Direct Taxes Code 2010.(PDF 3.07 MB)

 

Please click here to view our impact of DTC 2010 on Telecom Industry. (PDF 124 KB)

 

Please click here to view our impact of DTC 2010 on Financial Services.(PDF 247 KB)

 

Please click here to view our Flash news on Direct Tax Code 2010 (PDF 457 KB)

 

Please click here to view our presentation on Direct Tax Code 2010 (PDF 578 KB)

 

Please click here to view our analysis on impact of DTC 2010 on Foreign Institutional Investors (PDF 324 KB)

 

Please click here to view our analysis on impact of DTC 2010 on Information Technology/ Information Technology Enabled Services (PDF 128 KB)

 

Please click here to view our analysis on impact of DTC 2010 on Power Sector (PDF 124 KB)

 

Please click here to view our analysis on impact of DTC 2010 on Infrastructure Sector(PDF 522 KB)

 

 

Revised Discussion Paper 2010

 

The Government released the keenly-awaited Revised Discussion Paper on the DTC on 15 June 2010.  This Paper covers nine issues identified by the Honorable Finance Minister from various representations which were received earlier and two additional issues viz. Special Economic Zone and Wealth-tax.

 

While the Government was sensitive to the representations made, it seemed determined to balance the needs of revenue by fine tuning proposals to raise additional taxes and introducing additional anti-avoidance measures.

 

The Revised Discussion Paper focused on the following areas:

 

  • Minimum Alternate Tax – Gross assets vis-à-vis book profit
  • Tax treatment of savings – Exempt Exempt Tax (EET) vis-a-vis Exempt Exempt Exempt (EEE) basis

  • Taxation of income from employment – Retirement benefits and perquisites

  • Taxation of income from house property

  • Taxation of capital gains

  • Taxation of non-profit organizations

  • Special Economic Zone – Taxation of existing units

  • Concept of residence in the case of a company incorporated outside India

  • Double Taxation Avoidance Agreement vis-à-vis domestic law
  • Wealth Tax
  • General Anti Avoidance Rule
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    Click here to view our Flash News on Revised Discussion Paper 2010 (PDF 1.17 MB).

     

     

     

     

     

    Direct Taxes Code 2009

     

    The Finance Minister released a draft of the Direct Taxes Code, Bill 2009 (DTC) and a Discussion Paper for public comments on 12 August 2009.  The DTC aims to replace current Incom-tax Act, 1961 and Wealth Tax Act, 1957.

     

    The DTC was released with the stated objective of simplification, equity and non-discrimination, stability in the tax regime, introducing moderate levels of taxation and expanding the tax base.

     

    Click here to view our Flash News on Direct Taxes Code 2009 (PDF 1.1MB).

    Dinesh Kanabar-Deputy CEO

    Dinesh Kanabar-Deputy CEO

    Uday Ved - Partner, Tax

    Uday Ved - Partner, Tax