Doing Business in India - RSM Austria

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**** Mutual funds, other than equity oriented funds, are liable to DDT on the amount of dividend distributed, paid or declared. 2.2.7 Capital gain may arise on transfer of a capital asset. The expression “capital asset” means property of any kind. There are certain properties, which are excluded from the definition of the capital assets such as stock in trade, personal effects (except specified art works, jewellery, archaeological collections, drawings, paintings, sculptures or any work of art), agricultural land and certain other investments. There are two types of capital assets-long term capital assets and short-term capital assets. “Short term capital asset” means a capital asset held by an assessee for not more than 36 months, immediately prior to its date of transfer. In other words, if an assessee holds a capital asset for more than 36 months, then it is known as “long term capital asset”. However, in case of shares in a company or listed securities or units of notified mutual funds if they are held for more than 12 months immediately prior to the date of their transfer then such assets shall be classified as long-term capital assets. The gain arising on transfer of “Long term capital asset” is called Long Term Capital Gain and gain arising on transfer of “Short term capital asset” is called “Short Term Capital Gain”. Long-term capital gain is generally taxable at lower rates as compared to short-term capital gain. Short-term capital gains are taxed at normal tax rates, except as stated in the below paragraph. 2.2.8 The long-term capital gains, after indexation of cost (indexation available only to residents), are subject to tax at the rate of 20% (plus surcharge plus education cess). However, in the case of listed shares, listed securities and listed/unlisted units of mutual funds on which securities transaction tax is not payable, tax payable on long term capital gains computed without indexation of cost shall not exceed 10% (plus surcharge plus education cess). Long-term capital gains arising from transfer on or after 1 October 2004 of equity shares of a company on a recognized stock exchange in India or a unit of an equity oriented scheme of a specified mutual fund are exempt from tax provided that sale of such shares or units are chargeable to Securities Transaction Tax (discussed separately). The gains in respect of depreciable assets shall be taxed as short-term capital gain. Short term capital gain arising from transfer of shares of a company on a recognized stock exchange in India or a unit of an equity oriented scheme of a specified mutual fund are taxable at 15% (plus surcharge plus education cess) provided that sale of such shares or units are chargeable to Securities Transaction Tax. Other short-term capital gains are chargeable at normal income tax rates plus surcharge and education cess at applicable rates. 96 DOING BUSINESS IN INDIA
2.3 Taxable Income An Indian company is taxed on income accruing or arising either in or outside India and on income deemed to accrue or arise in India. The term ‘India’ to mean the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and subsoil underlying such waters, Continental shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 and the air space above its territory and territorial waters. A non-resident company is taxed only on income accruing or arising in India or income which is deemed to accrue or arise in India. Actual receipt of income in India is taxable in either of the cases. Income from foreign branches is taxable in India. Double taxation of foreign income of either of the entities is avoided by means of double taxation treaties which also provide for tax relief in the appropriate situation. Income of a subsidiary company is taxed separately as an independent entity. The following categories of income are deemed to accrue or arise in India for which taxpayers in all categories (including companies) are liable to Indian tax: All income accruing or arising, whether directly or indirectly, through or from any business connection, property, asset or source of income in India or through the transfer of a capital asset situated in India. Income by way of interest payable by the government or in respect of any debt incurred, or monies loaned and used for the purposes of a business or a profession carried on in India. Income by way of royalty payable by the government or in respect of any right, property or information used or services utilized for the purposes of a business or profession carried on in India except lump-sum payments for computer software supplied with a computer or computer-based equipment. Income by way of fees payable in respect of technical services by the government or utilized in a business or profession carried on in India. Taxation on income other than agricultural income is the province of the Central Government. Taxation of agricultural income is determined by the states and different rates are levied on such income by different states. In order to compute the income of the company, first one has to ascertain the gross total income under each head (ignoring the incomes which are exempted from the tax) viz. rental income of property, income from business or profession, capital gains and income from other sources such as interest, dividend etc. Then the admissible deductions viz. donations, income from new industrial undertakings, income from small-scale industries, export profits of units set up in special economic zones, etc. have to be made to arrive at the taxable income. 2.3.1 Income from House Property The annual value of property, consisting of any buildings or lands appurtenant thereto, of which the assessee is owner, is chargeable to tax. If, however, a house property is occupied by the assessee for the purpose of his business or profession, carried on by him, annual value of such property is not chargeable to tax. Assessee is allowed statutory deduction at the rate of 30% of such net annual value of the property irrespective of the actual amount spent. In addition to above, deduction is allowed for interest paid on borrowed capital. However, the amount of DOING BUSINESS IN INDIA 97
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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
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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 110 and 111: Entity Domestic Company Financial y
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
Page 160 and 161: 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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