Doing Business in India - RSM Austria

interest deductible is restricted to Rs. 1,50,000 (Rs. 30,000 in respect of specified
cases) in case of self-occupied residential house.
2.3.2 Income from Business or Profession
Net profit as shown in Profit and Loss account prepared in accordance with the
provisions of Parts II and III of the Sixth Schedule to the Companies Act, 1956 is the
starting point for computing taxable income. Net profit as above is to be increased
by the expenditure disallowable and is to be reduced by the expenditure allowable
as per the provisions of the Income-tax Act.
2.3.3 Capital Gains
Capital gains on corporate entities are taxed at the rates specified in Rates of Tax
section above. Capital gains are calculated by deducting the cost of acquisition, the
cost of any improvement to the asset and transfer expenditure from the
consideration received on transfer.
Cost of Acquisition
In case of a capital asset acquired before 1 April 1981 the cost of acquisition may be
taken as the fair market value of the asset as on 1 April 1981. In case of long-term
capital gains the indexed cost of acquisition and the indexed cost of improvement
would be deductible from the value of consideration for determining taxable capital
gains earned by residents.
Capital gains earned by non-residents on transfer of shares in or debentures of an
Indian company will be computed by converting the cost of acquisition,
improvement, or other expenses incurred on transfer and the sale price into the
same foreign currency as was initially utilized in the purchase of the shares or
debentures and reconverting the capital gain so determined in foreign currency to
Indian currency. In such a case, the benefit of indexation is not available to the nonresidents.
Long-term capital gains arising from transfer 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.
Short term capital gain arising from transfer 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 taxable at 15% (plus surcharge plus education cess)
provided that sale of such shares or units are chargeable to Securities Transaction
Tax.
Gains arising on transfer of capital assets by a company are exempt from tax under
the following circumstances
i. transfer by a parent company to a wholly owned Indian subsidiary
company;
ii.
transfer by a wholly owned subsidiary company to its Indian holding
company;
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DOING BUSINESS IN INDIA