India’s budget for 2016-17 was recently announced and is making its way through India’s Parliament. Once enacted, the budget will make a number of changes of interest to those on international assignment, including an increase to the tax surcharge rate and imposition of a tax on employer contributions to Recognised Provident Funds (RPFs), and on certain distributions from RPFs.
India’s budget for 2016-2017 was presented on 29 February 20161. Below we highlight the key features, in terms of the direct tax measures affecting individuals and their employers. Unless otherwise indicated, the proposed amendments relating to direct taxes will apply from the assessment year (“AY”) 2017-18.
KPMG in India has prepared a summary of the tax proposals (concerning direct and indirect taxes, customs duties, and other levies) in the budget. KPMG has also made available a “tax card” that provides a quick-at-a-glance look at the tax rates (for both direct and indirect taxes) as proposed in budget. For these budget publications and documents, please visit the website for the KPMG International member firm in India Read this.
New taxation norms proposed on retirals, including tax on employer’s contribution and withdrawals by the employees, would mean additional tax for all employees in India (including international assignees). In addition to the enhanced rate of surcharge, this could have the result of increasing employers’ international assignment costs.
The tax changes described in this Flash Alert may affect cost projections for future assignees and budgeting for international assignments to India or from India where the assignee will be subject to Indian taxation. Furthermore, any resultant tax differentials may impact tax equalizations. Finally, where appropriate, adjustments by payroll administrators to withholdings should also be made once these rules are enacted.
Further clarifications and FAQs are expected with respect to above provisions.
The following changes may be of interest to outbound assignees from India:
(There are other measures related to corporate taxation. Please refer to the budget summary produced by the KPMG International member firm in India referred to above.)
The Finance Bill will go through its Parliamentary stages in the coming weeks. Once approved by both houses of the Parliament and by the President of India, the legislation will come into force immediately.
1 For the budget speech and related budget documents, see the Ministry of Finance website at: http://indiabudget.nic.in/.
For additional information or assistance, please contact your local GMS or People Services professional or Parizad Sirwalla (tel. +91 (22) 3090 2010 or firstname.lastname@example.org), partner with KPMG in India in Mumbai.
The information contained in this newsletter was submitted by the KPMG International member firm in the India.
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