India - Budget Aims to Attract Foreign Investment | KPMG | CA

India - Budget Aims to Attract Foreign Investment

India - Budget Aims to Attract Foreign Investment

India introduced measures to promote the country as an attractive business destination in its 2015 budget.

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In its 2015 budget, India introduced measures to promote the country as an attractive business destination, such as deferring implementing GAAR and reducing the corporate tax rate to 25% (from 30%) over four years. These changes could be of interest to Canadian clients with investments in the country.

Among other changes, the 2015 budget:

  • Reduces the withholding tax rate on royalties and technical services fees to 10% (from 25%) effective April 1, 2015 (subject to treaty benefits, if any). However, the 10% rate will increase by a surcharge based on income levels.
  • Defers the applicability of GAAR by two years so that it applies to investments made after March 31, 2017.
  • Exempts foreign institutional investors that earn long-term capital gains arising from securities sales from minimum tax (i.e., the Minimum Alternate Tax).
  • Resolves some of the interpretational issues around the recent retrospective announcement providing that the sale of shares would be taxable in India if the shares derive their value substantially from assets situated in India.
  • Proposes that a non-Indian corporation will be resident in India if its "place of effective management" is in India at any time of the year.
  • Implements GST effective April 1, 2016.
  • Reduces the basic corporate tax rate to 25% (from 30%) over the next four years, but increases the surcharge by 2%.

India tabled the proposed amendments in parliament and will vote on the budget in May or June.

For more information, contact your KPMG adviser.

Information is current to March 10, 2015.

The information contained in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.

For more information, contact KPMG's National Tax Centre at 416.777.8500.

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