Latest Expert Exchange Queries
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) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: VAT Audit :: cpt :: TAX RATES - GOODS TAXABLE @ 4% :: form 3cd :: ACCOUNTING STANDARD :: VAT RATES :: Central Excise rule to resale the machines to a new company :: due date for vat payment :: empanelment :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India
 
 
News Headlines »
 Filing of online return for 4th quarter of 2016-17 — extension of period thereof
 CBDT simplifies ITR filing process from FY18
 Govt extends service tax return filing date to April 30
 No move to tax farm income, clarifies Arun Jaitley
 New board for indirect taxes to become operational from June 1
  9 changes that came into effect from April 1
 First time filing income tax? Here's all you need to know about Form 16 and Form 26AS
 New Opening Financial Controller Chartered Accountant (Manufacturing Plant) A Leading Company
 Income Tax Filing 2017: All you want to know about the single page ITR form SAHAJ
 How to benefit from investments in tax saving mutual funds
 60 per cent of income tax notices on fishy cash deposits returned

India to trap outsourcers in tax net
May, 22nd 2008

Events unfolding in New Delhi could have far-reaching repercussions, as the Indian parliament deliberates changes to its tax code that could deeply affect businesses here in the States.

Whereas some believe the pending legislation is "business-neutral," one specialist I spoke with said that the proposed changes could cost American businesses with Indian subsidiaries or Indian outsourcing initiatives a significant amount of money.

Don Jones, partner at BDO Seidman, an accounting and advisory firm, sees the potential changes as part of a larger trend, in which Indian tax authorities and its legislature have become more aggressive in the past few years when dealing with foreign entities that seek to do business in India.

As the Indian tax system matures, and as its international business increases, India wants to capture more revenue in their taxing net, says Jones.

This year, the Indian federal budget is pursuing that goal more aggressively than ever before.

Here, as Jones laid it out for me, are the specific changes that will make it more expensive for U.S. companies to do business in India if the legislation is passed.

Transfer pricing
Most countries establish a profitability tax at a rate of anywhere from six percent to eight percent for services rendered to the parent company or to the company hired by a foreign company. In other words, if a U.S. parent company requires R&D services from its Indian subsidiary, the government would take between six percent and eight percent of the fee for those services as tax for profit.

The legislation currently before the Indian parliament would increase that percentage to between 15 percent and 25 percent.

Add to this the fact that 7,000 miles away, our own IRS will not accept those rates when the U.S. company tries to write it off.

Tax holidays
The tax holiday that India granted for units registered under its software technology parks provisions expire on March 31, 2009. There is nothing in the current legislation that will renew the tax holiday for tech companies, meaning they will have to pay the incorporated tax of 33.99 percent beginning in the second quarter of 2009.

Capital gains
An increase in India's short-term capital gains tax from 10 percent to 15 percent has been proposed as part of the current legislation.

Jones says this is the government's attempt to decrease the volatility of the Indian stock market.

Filing deadline shortened
The legislation will abbreviate the deadline for corporate tax filing from Oct. 31 to Sept. 30. As a result, more companies will be captured in the penalty net.

It's a bit like a speed trap, I suppose.

Increase in excise tax
This portion of the changes in the tax code will impact the software community directly. Packaged software will be subject to an increase in the excise tax from 8 percent to 12 percent.

While companies such as SAP and Oracle might be exempt from the increase because their software is technically not "packaged" software, companies such as Microsoft will be directly affected.

Broadening the definition of a service
The 12.3 percent service tax will be levied on a wider array of services, including maintenance and consultancy services related to software. In other words, services provided for IT -- that is, software for use in the course of the furtherance of business and commerce -- is now considered a taxable service.

This will be another direct increase in the cost of doing business in India.

Also included in the services tax net will be Internet-oriented services and telecommunications services provided through the Internet. This includes services provided in relation to Internet backbone services, carrier services, Internet traffic, and access services.

Add to this a turnover rate now being pegged at 105 percent, plus the weak dollar, and we can see that outsourcing in India is going to cost U.S. firms a great deal more going forward.

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Development Software Programming Software Engineering Custom Software Development Requirement Based Software Development Software Solutions Software Serv

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