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 STANDARDS :: form 3cd :: due date for vat payment :: articles on VAT and GST in India :: cpt :: ACCOUNTING STANDARD :: VAT RATES :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: Central Excise rule to resale the machines to a new company :: empanelment :: list of goods taxed at 4% :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT
 
 
« General »
 Tax collection assumptions in India's budget ambitious
 All scrutiny cases, sans search, to be e-assessed
 Key tax changes that will come into effect from April 1
 Eight lakh companies on Income Tax department radar for not filing tax returns
 4 things a taxpayer shouldn’t miss
 Impact on LTCG will be more than 10 per cent
 Here's how much the tax reliefs you want will cost the finance minister
 Companies (Appointment and Qualification of Directors) Amendment Rules, 2018
 How young earners can claim HRA tax exemption with ease
 IT firms eye change in foreign tax credit rule
 The most thrilling idea before every Budget: No income tax

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 2018 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