Doing Business in India - RSM Austria

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Entity Domestic Company Financial year 2009-10 Financial year 2010-11 Foreign Company Financial year 2009-10 Financial year 2010-11 Companies having total income above Rs. 1,00,00,000 33.99% 33.22% 42.23% 42.23% Effective Tax Rates Companies having total income up to Rs. 1,00,00,000 30.90% 30.90% 41.20% 41.20% 2.2.3 Minimum Alternate Tax (MAT) For the Financial year 2010-11 if the income-tax payable as computed under the provisions of the Income Tax Act is less than a certain specified percentage of the book profits as referred in the table below, a special tax is levied on certain companies known as the Minimum Alternate Tax (MAT). The applicable rates of MAT for FY 2009-10 & FY 2010-11 are as below: Entity Domestic Company Financial year 2009-10 Financial year 2010-11 Foreign Company Financial year 2009-10 Financial year 2010-11 Companies having total income above Rs. 1,00,00,000 16.995% 19.9305% 15.836% 19.0035% Effective Tax Rates Companies having total income up to Rs. 1,00,00,000 15.45% 18.54% 15.45% 18.54% MAT is not applicable to non-corporate entities. MAT paid can be set-off in any of the subsequent 10 assessment years against the normal tax liability in excess of MAT payable under section 115JB of the Act. Export oriented units, units set up in Free Trade Zones / Software Technology Parks and Electronic Hardware Technology Parks are also liable to MAT from the financial year 2007-08. However, under section 10AA of the Income Tax Act, units set-up in Special Economic Zone (SEZ) are not liable to pay MAT. Further under section 115JB, from 1 April 2005, SEZ developers are also exempted from the payment of MAT. 2.2.4 Fringe Benefit Tax (FBT) Fringe Benefit Tax has been abolished from 1 April 2009. 2.2.5 Dividend Distribution Tax (DDT) DDT is a tax payable on the dividend declared, distributed or paid. Dividends paid by an Indian company are currently exempt from income tax in the hands of the recipient shareholders. However, for FY 2009-10 the company paying the dividends is required to pay DDT on the amount of dividends, at the rate of 16.995%. An exemption from this tax has been granted in case of dividends distributed on or 94 DOING BUSINESS IN INDIA
after 1 April 2006 out of current income of Special Economic Zone (SEZ) developers. Specified mutual funds are also liable to dividend distribution tax at specified rates. For the financial year 2010-11, the DDT rate in case of a domestic company is 16.60875%. In case a domestic company declares, distributes or pays dividend whether out of current or accumulated profits, deduction will be available from the amount of any dividend received by it from its subsidiary. The subsidiary, however, is required to pay DDT on such dividend. 2.2.6 Income of a foreign company or non-resident (not being a company) from royalty, technical fees, dividends, interest and income from units is taxed at the following rates (in the absence of lower rates under Double Taxation Avoidance Agreement): Type of Income Royalty and fees for technical services payable under an agreement approved by the Government of India or in accordance with new Industrial Policy * % of Gross Amount in case of payment to foreign company m o r e t h a n R s . 1,00,00,000 during the FY % o f G r o s s Amount in case of payment to foreign company less than Rs. 1,00,00,000 during the FY 10.558%** 10.30%** Dividends Nil *** Nil *** Interest on monies borrowed in foreign currency Income from units of notified Mutual Fund purchased in foreign currency 21.115% 20.60% Nil **** Nil **** * Chargeable on net basis at normal tax rate specified for corporates above if royalty or fees for technical services received from Government or an Indian concern in pursuance of an agreement made by a non-resident (not being a company) or a foreign company with Government or the Indian concern after 31 March 2003 where such non-resident or a foreign company carries on a business in India through a permanent establishment situated therein or performs professional services from a fixed place of profession situated therein and the right, property or contract in respect of which the royalties or fees for technical services are paid is effectively connected with such permanent establishment or fixed place of business as the case may be. * * Effective in respect of royalty or fees for technical services under agreements entered into on or after 1 June 2005. The rate of 20% (Plus surcharge as applicable) would apply in respect of agreement entered into between 1 June 1997 and 1 June 2005 (30% (Plus surcharge as applicable) for agreement entered into prior to 1 June 1997). The effective rates as per the table above shall be same in respect of financial year 2010-11. *** Domestic companies are liable to pay additional DDT on the amount of dividend distributed, paid or declared. DOING BUSINESS IN INDIA 95
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International global excellence in
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Doing business in India
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Marine Drive, Mumbai
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Contents Hawa Mahal, Jaipur
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Education .........................
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SIGNIFICANT COMPANY LAW REGULATIONS
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ANNEXURE 1 Sectors Prohibited for F
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Chapter 1 India - A Profile Golden
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2.2 Language India is a land of man
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5.2 Communication The Indian teleph
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7.5 Public Holidays The statutory p
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CHAPTER 2 INDIAN BUSINESS AND INVES
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This resulted in a fall in the Bomb
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4.3.3 Designs After expiry of three
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non-banking finance activities viz.
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trading in derivative based on BSE
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same as those where concessional fi
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10.3 Low Research and Development C
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CHAPTER 3 BUSINESS ENTITIES 1.0 FOR
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Sr. No. Criteria Requirements 1 Tra
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The project is funded by inward rem
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cause the disassociation of the par
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2.1.2 MOA 2.1.3 AOA Companies for r
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paid up equity capital can be less
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The requirements for public and pri
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3.0. STATUTORY REQUIREMENTS FOR COM
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3.4 Online Filing System Ministry o
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Section Nature of default 168 Defau
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4.0 SIGNIFICANT COMPANY LAW REGULAT
Page 60 and 61: 4.7 Audit Committees For better cor
Page 62 and 63: The meetings of the board are requi
Page 64 and 65: Chapter 4 Human Resources Kathakali
Page 66 and 67: Employee benefit What is it? Applic
Page 68 and 69: Employee benefit D e p o s i t L i
Page 70 and 71: 2.5 The Equal Remuneration Act, 197
Page 72 and 73: The Factories Act safeguards agains
Page 74 and 75: CHAPTER 5 FOREIGN INVESTMENT IN IND
Page 76 and 77: 2.3 Prohibition on investments 2.3.
Page 78 and 79: ii. Subject to compliance with the
Page 80 and 81: ii. iii. iv. The NRI investor has t
Page 82 and 83: ii. On repatriation basis An NRI ca
Page 84 and 85: Indian company can issue ESOPs to e
Page 86 and 87: ii. iii. iv. The foreign equity aft
Page 88 and 89: vi. Branch Offices have to submit A
Page 90 and 91: ii. ECB up to US$ 20 million or equ
Page 92 and 93: 3.2 Approval Route 3.2.1 Eligible B
Page 94 and 95: 3.2.6 End Use not permitted i. Util
Page 96 and 97: issued by Reserve Bank from time to
Page 98 and 99: Sr. No. Sector/Activity FDI Cap / E
Page 100 and 101: Sr. No. II C POWER Sector/Activity
Page 106 and 107: Sr. No. 29. Sector/Activity Telecom
Page 108 and 109: Chapter 6 Taxation System India Gat
Page 112 and 113: **** Mutual funds, other than equit
Page 114 and 115: interest deductible is restricted t
Page 116 and 117: 2.4 Tax Relief In order to encourag
Page 118 and 119: Section Details of Exemption / Dedu
Page 120 and 121: Section 35 DDA 54G 54GA 54EC 10(34)
Page 122 and 123: Sr. No. Nature of activity and loca
Page 128 and 129: Sr. No. xviii Nature of activity an
Page 130 and 131: No deduction under 80IA, 80IB, 80IA
Page 132 and 133: Tax is payable in advance on income
Page 134 and 135: 3.1.2 Other Non-corporate Entities
Page 136 and 137: the Finance Act 2010, 'bullion' is
Page 138 and 139: Rs. 40,00,000. The scheme is applic
Page 140 and 141: 4.5 Income of Offshore Funds Income
Page 142 and 143: 7.3 Advance Rulings The Indian gove
Page 144 and 145: 9.0 INDIRECT TAXES 9.1 Goods and Se
Page 146 and 147: on goods manufactured and vice vers
Page 148 and 149: Annexure I Double Taxation Avoidanc
Page 150 and 151: Sr. No. Country Dividend [Note 1] T
Page 156 and 157: ANNEXURE II: TAX DEDUCTION AT SOURC
Page 158 and 159: NOTES 142 DOING BUSINESS IN INDIA
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NOTES 144 DOING BUSINESS IN INDIA
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NOTES 146 DOING BUSINESS IN INDIA
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RSM International Executive Office,
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