Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: TDS :: ACCOUNTING STANDARD :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: cpt :: ACCOUNTING STANDARDS :: form 3cd :: ARTICLES ON INPUT TAX CREDIT IN VAT :: list of goods taxed at 4% :: articles on VAT and GST in India :: TAX RATES - GOODS TAXABLE @ 4% :: due date for vat payment :: VAT Audit :: Central Excise rule to resale the machines to a new company :: empanelment
 
 
« General »
 Property tax revision unlikely till April 2019
 Norms for filing tax are the same for residents and non-residents
 Data shows new tax regime widely adopted
 Confusion over GST persists: Wholesale grain market affected, sales fall by 40 percent in Pune
 Slow tax growth reflects companies' GST troubles
 What is PAN card? Why is it important?
 Govt to cut down executive discretion on tax laws
 Businesses can start filing July returns on GSTN from August 5
 Are you earning abroad? Know the tax rules
 Attention last minute tax filers! Know about key changes made by govt this year
 Accounting relief for IndAS companies

A tax threat to BPOs
October, 26th 2009

The revenue department has created needless uncertainty on the tax liability of foreign parents and principals of business entities in India, by suddenly withdrawing a 40-year old circular. It needs to bring out another circular at the earliest, clarifying that its intention is not to endanger Indias thriving outsourcing industry, particularly the captive units which generate about 35% of the sectors revenue.

The Income Tax Act requires foreign companies to include in their income taxable in India any income arising from or through its business connection in India.

There are no clear-cut rules to define a business connection. The circular that has now been withdrawn had been successfully interpreted, to the chagrin of the tax department, to put the income generated for a foreign company by a business process outsourcing unit in India outside the ambit of taxation in India.

The only condition was that the foreign client should fully compensate the Indian BPO for its services, something that is not readily guaranteed if the Indian BPO is a subsidiary of the foreign client.

Now, with the withdrawal of that circular, a captive BPO or a BPO that has a substantial part of its work coming from a single foreign client, runs the risk of being classified as a business connection a dependent agent is a business connection.

And then, a portion of the income the foreign client derives from the activities of the Indian BPO could be liable to tax in India. Now, such a situation would discourage foreign companies to outsource work to India, particularly to captives.

Such actions by the revenue department only help to make the tax environment unstable and hinder investment. More significantly, the withdrawal of the circular creates uncertainty for Indias booming IT/ITeS industry which thrives on activities outsourced by foreign companies.

The captive BPOs of foreign companies as well as those that earn a greater portion of their income from a single foreign entity, and thus could be construed as a business connection, may find their survival threatened by this single act of the tax authorities. Revenue must make amends.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
System Testing Solution Manual Software Testing Solutions Automation Software Testing Solutions System Workflow Testing System Manual Testing

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions