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: due date for vat payment :: empanelment :: TAX RATES - GOODS TAXABLE @ 4% :: VAT Audit :: Central Excise rule to resale the machines to a new company :: ARTICLES ON INPUT TAX CREDIT IN VAT :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: VAT RATES :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: ACCOUNTING STANDARD :: cpt :: TDS
« Direct Tax »
 CBDT issues final rules for taxing share buy back by companies
 CBDT issues final rules for taxing share-buyback
 The direct tax collections up to September, 2016 are at Rs. 3.27 lakh crore which is 8.95% more than the net collections for the corresponding period last year.
 IDS is tremendous success: CBDT chief Rani Singh Nair
 Submit monthly data of appeals disposed of: CBDT to officers
 Direct tax mop-up jumps 9 per cent in H1, indirect tax up 26 per cent
 Income tax department slams notice on five Mumbai-based exporters over offshore accounts
 Redress TDS mismatch grievance of taxpayers: CBDT
 Tax department changes rule for accommodating deductions for deferred spectrum payment
 Tax dept renotifies income computation, disclosure standards
 Sushil Chandra to be the next CBDT chief

FIIs fear higher tax outgo under new direct tax
September, 16th 2009

Foreign institutional investors (FIIs) have approached the ministry of finance (MoF) seeking an extension of the feedback window on the new direct tax code. People familiar with the issue told ET that the deadline for submitting feedback has lapsed. Terming the window insufficient for a detailed response, FIIs have asked for an extension.

There is a perception that if implemented, the direct tax code could increase tax liabilities of foreign portfolio managers significantly. So far in 2009, FIIs have pumped in $8.6 billion into Indian equities. As of September 15, 2009, there are around 1,695 Sebi-registered FIIs in India.

Under the proposed tax code, securities transaction tax (STT) will be abolished and tax on long-term gains will be brought back. The code proposes that FIIs will be taxed at a flat rate of 30% on net capital gains as against nil/10%/20% on long-term capital gains and 15%/30% on short-term capital gains under the existing law.

It also introduces general anti-avoidance rules (GAAR), under which any transaction could be considered to be a tax avoidance transaction and the onus for proving otherwise is on the tax payer. Currently, double taxation avoidance agreements (DTAA) override the domestic law.

There are concerns that GAAR could be used against even genuine transactions, thereby affecting portfolio flows into the country. However, the new code proposes that the provisions under the act or DTAA, whichever is later in time, shall prevail.

This negates the provisions of more than 70-odd comprehensive DTAAs, which India has signed with other countries, thereby eroding the subsequent tax benefits. Experts believe the ownership structure of FIIs could be impacted and there would be need for re-organisation.

Clearly the proposed code is a negative for FIIs and will impact inflows (if implemented). FIIs may also need to restructure their operations to assess the tax beneficial ways, in which they could invest in India, said Akhil Hirani, managing partner of Majmudar & Co.

The concern among the institutional investors is palpable. They are concerned that the domestic tax rule will override international treaties, ie GAAR will override DTAA. Additionally, almost 50% of the registered funds are coming through the DTAA route. So, effectively they will end up paying double taxes, said a person familiar with the issue.

Interestingly, both Mauritius and Singapore, have signed double tax avoidance treaties with India. As per custodians, over 50% of the money comes in via the Mauritius route.

The new tax code if implemented will only benefit those who churn portfolios frequently. The larger chunk of FIIs are long-only funds. For them, 30% tax will be a huge chunk of their profits, as it will be moved into business income, said an official.

There is a growing perception amongst FIIs that while India is an exciting market, frequent regulatory changes make it a very complex market to invest in.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Custom Software Development Outsourcing Custom Software Development Offshore Cus

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